Platou: Shipping shares a bad business in 2014

After the luckiest or smartest share investors were spinning gold in 2013, shareholders in bulk and tanker carriers have seen their money disappear in 2014, though Platou points to solid markets for the rest of 2014.

2013 was a golden year for many shareholders with investments placed in carriers. Platou Market's own share index of some of the world's largest carriers increased 36 percent, according to the major Norwegian analyst agency's quarterly report.

The weak beginning of the year for the tanker and bulk markets has made shares in the two segments drop 16 percent so far, though Platou - like numerous other players in the industry - is optimistic in terms of developments for the rest of 2014.

"In contrast to recent years, supply growth doesn’t seem to be the issue in 2014 for commodity shipping. Fleet growth is now down to zero for tankers and less than five percent for dry bulk. Instead we see the weak freight market experienced this year as a function of temporary demand volatility. We believe that a general trend of destocking in many commodity markets has amplified seasonal rate weakness. China in particular built up commodity stocks through last fall and early winter, living off ample inventories since then. This inventory destocking has hurt shipping demand," says Platou in its shipping quarterly report.

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The analyst thus believe that the market will improve once the stocks need to be refilled and that there is cause for optimism on the medium-long term and a few years into the future.

Fundamentally okay

"We continue to expect that fundamentals will improve sufficiently to support stronger shipping markets in the second half of 2014. A better rate environment should give much needed support to pressured ship values and revive beaten down commodity shipping stocks," says Platou.

One of the shares that has dropped as the markets have disappointed is dry bulk carrier Norden, whose share decreased 16 percent over three months and 22 percent over six months, according to the report.

Maersk's shares, on the other hand, have done better over the last year. The share has increased over the past 3, 6 and 12 month periods, and Platou does believe that the container market has bottomed.

"We believe the container shipping market has bottomed. Rates should gradually recover with higher global growth and steady fleet expansion. Additionally, we are more optimistic for LNG shipping, anticipating higher trade volumes will support a resurgence of rates into 2016. For LPG shipping we have upwardly adjusted our 2014 and 2015 rate forecasts, but we have significantly downgraded 2016 rates on the back of excessive fleet growth."

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