[28 NOV 2019] Capital markets have not been overly enthusiastic about shipping in recent years, this past year being no exception, but, according to more than a few finance professionals, this is prime time for a turn­around in fortunes with smart money poised to see solid returns. This is also the opinion of Erik Hel­berg, CEO of Clarksons Platou Securities, who held a convincing presentation in Hamburg at the 23rd annual HANSA Forum for Shipping Finance. “Con­ditions are ripe for a turnaround,” Helberg said, indi­cating multiple reasons for investors to reassess a market that has weathered one of its toughest peri­ods in recent memory. Equity has done surprisingly well in 2019, said Helberg, with the possible ex­ception of LNG carriers, which saw their general performance fall by some 29% year-on-year. But this was the exception that proves the rule, so to speak, with equity returns in the majority of other shipping sectors having shown respectable-to-incredible re­turns in the year-to-date (indeed, shipping as a total entity, rose by 13% over the year). Container equity grew by a modest 5% this year, Helberg showed in a slide, followed by dry bulk with 11% growth and ship leasing companies with 30%. The highest end growth was in tankers, however, with handsome gains of 42%, 73% and 99% in 2019 in the equity areas of product tankers, crude tankers and mix tank­ers.

Cargo demand growth will finally outstrip ton­nage growth in the coming few years with demand growth having already averaged 3.2% over the past two years while newbuilding deliveries should only grow by 2.9% in the coming three years (versus 4.6% on average in the past three years). Dry bulk demand growth amounted to 2.6% in the 2016-2018 period, which would also indication some convergence in supply-demand growth in 2020-2021. Equity, leas­ing and alternative finance is well-positioned to take advantage of the general decline in shipyard capacity (down 62% between 2008 and 2018) and simul­taneous reduction in maritime bank lending (down 25% between 2010 and 2017). Indeed, Helberg said, shipping is set to see the best period in recent history in 2020-2022, especially with the “favourable sup­ply disruption” in tonnage coinciding with IMO 2020 and its limitations on operating tonnage. Capi­tal is no longer available for “speculative craziness”, in his words, with capital likely moving up the lad­der to larger, consolidated companies, which could lead to an “extremely bifurcated market” between the haves and have-nots. With shipping valuations already set to increase in the next few years, none­theless, with investors increasingly considering both the size and liquidity of shipping companies, smaller companies would be well-advised to either “team up with smart money and go private” or bite the bullet and consolidate with a larger shipping entity.

For insightful shipping and broking news like this every day, subscribe to the BMTI Daily Report.