Shipping operator shares rally on expectation of industry recovery

PUBLISHED : Monday, 13 February, 2017, 6:29pm
UPDATED : Monday, 13 February, 2017, 10:50pm

The shipping industry will see an improved operating environment in 2017 driven by further market consolidation following the bankruptcy of Korean giant Hanjin Shipping, said market watchers.

Reflecting the more optimistic outlook, most Hong Kong listed shipping operators outperformed on the Hong Kong stock exchange on Monday – including several subsidiaries of state-run ocean carrier China Cosco Shipping Corp.

China’s Cosco Shipping Holdings jumped 10.56 per cent to close at a one-year high of HK$3.77 while Cosco Shipping Development hit a two month high, closing 1.11 per cent higher at HK$1.82, the sixth consecutive trading day the stock has gained.

Cosco Shipping Energy Transportation added 1.32 per cent to close at HK$4.60, its highest level since November 23 last year.

Separately, Orient Overseas International advanced 2.1 per cent to HK$43.80, its highest in three weeks.

“We upgrade to ‘overweight’ for the shipping industry in 2017,” Han Yichao, an analyst from ChangJiang Security, said in a report. “The shipping industry will consolidate further with more mergers and acquisitions because of alliances and profit slumps.”

Hanjin Shipping collapse may be the beginning of the end for profitable global trade

In October, Japan’s top three shipping companies decided to merge their container operations after Hanjin’s collapse in South Korea last year.

The demand-and-supply relationship is expected to improve this year, said Han. “The growth rate of the supply and demand side is estimated to reach at 2.44 per cent and 3.23 per cent respectively. It is the first time that the demand growth rate exceeds supply since 2011,” he added.

Robbert van Trooijen, the Asia-Pacific chief of Maersk Line, was quoted by Bloomberg as saying that the order backlog for vessels is falling after years of overcapacity and excessive optimism about demand.

Maersk Line, which lost US$384 million last year, said its expects to be profitable in 2017. The company forecasts the global container market to grow 2 to 4 per cent this year amid the consolidation wave and said it is seeking a more balanced supply-demand relationship in its negotiations with customers.