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Profit Improvement Trend in Shipping Industry... Continuing Through Q2

Profit Improvement Trend in Shipping Industry... Continuing Through Q2


[Asia Economy Reporter Ji-hwan Park] Korea Investment & Securities stated on the 17th that the earnings of container shipping companies are expected to exceed expectations again in the second quarter, recommending an overweight stance on the shipping sector.


Ko Un Choi, a researcher at Korea Investment & Securities, analyzed, "Although container shipping companies' stock prices have recently stalled due to concerns over demand peak-out, supply constraints still exert a greater influence due to port congestion and the aftermath of the Suez Canal incident."


Additionally, the turnaround of bulk shipping is considered to be just beginning. Deferred demand caused by COVID-19 is becoming full-fledged, and dry bulk shipping rates are also expected to surpass the highest levels since 2010, following container shipping.


Researcher Choi said, "Even excluding the temporary impact of COVID-19, the supply-demand environment in the shipping industry is the best in 10 years," adding, "When the benefits of supply constraints and deferred demand end, the effect of shipping companies minimizing vessel investments due to the prolonged recession will support freight market conditions."


The supply volume to be added until 2022 due to the two-year order gap is the lowest ever. With ship environmental regulations expected to be increasingly strengthened, it will be difficult to make large-scale investments until carbon-neutral ship technology is confirmed.


Researcher Choi emphasized, "Even if the current short-term overheated market calms down in the second half, the leadership of the shipping market is expected to remain with the shipping companies."


He added, "There were concerns that stock prices would also be adjusted if the freight index declined, but the SCFI (Shanghai Containerized Freight Index) already peaked in January," and "Although the index turned downward in the first quarter, global container shipping companies' stock prices have maintained strength."


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