Container Market Boom to Continue In the Near Term
Back in 2016, Drewry Maritime Financial Research (DMFR) launched a model portfolio – selecting stocks within the global maritime space to ensure a balanced approach to managing risk in a low return environment.
Recommended stocks are hand-picked based on the fundamentals of each entity, coupled with near-term triggers. The objective of the model portfolio is to generate optimum returns in conjunction with moderate risk.
August 2021
• The boom in the container market is continuing with no sign of abatement in the near term. Container freight rates on some routes are close to USD 13,000 per 40-foot container, which almost guarantees record profitability for carriers this year. Rising freight rates have ensured that stock markets remain strong, with more room for further upside. The recent disruption at Yantian Port, port congestions, logjams and a higher freight as an outcome could be a recurring theme until 1H22. While the blockage of a key shipping artery such as the Suez Canal is a rare likelihood, the risk that further outbreaks of Covid close to major hub ports remain ever-present, particularly given the prevalence of new viral variants.
• Drewry’s Port sector index continued to surge, gaining strength from global vaccination drives and rebound in trade. The index in 2Q21 grew by 9.6% QoQ (vs 1Q21: 8.9% and 4Q20: 16.4%) on the back of higher returns posted by global/international terminal operators vis-à-vis their more geographically constrained regional terminal peers. Drewry’s current forecast is for a 10.2% increase in global port handling in 2021. This equates to a more than 80 mteu uplift in port volumes over the course of the year, compared to the 9.5 mteu reduction recorded in 2020. The recovery is expected to be sustained into 2022, after which annual growth will normalise to 3.0-3.5%. Despite the near-term optimism, there remains a high degree of uncertainty attached with the spread of new variants of the virus (Delta and Lambda) and a sooner-than-expected interest rate hike – both of which can take a toll on economic growth prospects.
