Confidence in shipping’s prospects is always a question of how tightly you tailor your outlook horizon. The default focus is the recovery that lies ahead. During even the direst downturn, shipowners can still be heard talking up the countercyclical play as they identify the singular, microscopic green shoot in the distance, such is the pathological optimism of the industry. However, this year’s outlook has turned such thinking on its head. Amid the general geopolitical disorder and coronavirus chaos, there exists a sliver of stability — albeit a wholly temporary one. Looking solely at the immediate fundamentals for 2022, a positive year lies ahead for the shipping markets. The stellar profits may have peaked along with supply chain disruption, but earnings will continue to be considerably higher than pre-coronavirus levels and demand and supply are set to be broadly in balance for the global shipping industry next year. Sure, those prepared to look a little longer-term and accept a more objective, clear-eyed assessment of the long list of risk factors that lie ahead may want to moderate their new year cheer — but let’s at least start with the good news.

Seaborne trade volumes have largely regained their lost territory and, for once, demand has not been scuppered by its old foe supply. A purely statistical look at the past 12 months shows how a combination of healthy growth in tonne-mile demand and widespread logistical disruption has managed to outweigh the limited expansion of the world fleet. The absence of coal shipments from Australia to China, more iron ore from Brazil, container tonnage tied up in Covid-induced congestion all played their part — but the headline here is more volume in 2021 and more activity for most trades. And this rarest of opportunities has had a free run. According to Lloyd’s List Intelligence data, fleet growth barely touched 3% in 2021, while total seaborne trade was up 5%. The fact that scrapping was up 24% in dwt terms was neither here nor there.

Even accounting for the uptick in tanker and offshore removals amid deeply unprofitable markets, these levels were still relatively low, coming as they did after almost no scrapping in 2020 due to Covid restrictions. So 29m dwt in 2021 had very little impact on the global view of the 2.3bn dwt fleet. Heading into 2022, that favorable balance remains in place. Demand growth for dry bulk and containers will moderate next year in absolute terms — but relatively speaking, it will remain high, and the limited influx of new vessels will sustain the broadly positive conditions. Even in tankers, where five consecutive quarters of depressed rates have clearly taken a toll on the preternaturally positive chief executives, there is at least now a consensus that the market has troughed. Omicron, of course, could yet delay the rate recovery again, but as the accepted laws of shipping market physics describe: if things can’t get much worse, they can only eventually get better. But — and there are inevitably several buts to follow — this temporary equilibrium cannot be read without the context of what will ensue in terms of short-, medium- and long-term risk.

The industry is heading into a seismic period of uncertainty where any brief period of balance should be viewed as a welcome respite from the turbulence rather than a signal of sustained positivity. So, let’s consider the short-term disrupters directly ahead. The immediate implications of the 35 mutations on Omicron’s spike protein are simultaneously obvious and unknowable at the point of writing, but the world has just received a rude reminder that the virus’s path to becoming an endemic disease will not be smooth. Diminishing economic disruption and uncertainty, stemming from the pandemic, and ensuing supply-side bottlenecks, bode well enough, but next year will herald a new phase in the recovery, driven by distinct shifts in the key macroeconomic trends.

The recovery will be uneven. It will take place amid a very uncertain monetary policy backdrop and, while the more conservative community of economists seem confident enough that inflation will fall back in 2022, it remains a key concern for shipping. When Lloyd’s List polled its readership early in December, 21% flagged inflation as the most significant factor affecting shipping markets over the next two years, citing the negative effect on everything from consumption and the demand for goods, right down to financing available for ships. Prospects of a slowdown in retail demand may be the talk of supply chain analysts, but the bigger risk factor keeping shipping executives awake at night — as it has been for several years now — is a slowdown in China. As China goes, so goes the global economy and with Beijing cracking down on economically critical sectors and high corporate debt with an aggression unmatched by any other government, the Middle Kingdom’s economic gearchange has been visible this year. A continued slowdown of growth in China would inevitably cast a long shadow over shipping markets. It would also dampen commodity prices, admittedly reducing the prospects of sustained inflation, but we should be careful about making long-term predictions based on short-term market movements. There is a lot of noise around the freight markets, all caused by the pandemic, as well as policy noise in China as President Xi considers what to do about the property sector. Yet in macro terms, the combination of comparatively sluggish growth in China, a rebound in India, some growth in Russia, and near-term acceleration in advanced economies leave most economists sticking with the forecast of global expansion in 2022, with real GDP likely to rise between 4%-4.5%. Such predictions, of course, come with a large coronavirus variant-shaped caveat.

For shipping, the mid-term risks are more significantly related to the energy transition, which has finally started to hit home in a tangible way this year. Following several years of aspirational rhetoric and easy promises on decarbonization, the deadlines are starting to close in, and decisions are required. Those dual-fueled green pioneers already on the water are not utilizing their theoretical environmental-enhancing liquefied natural gas tanks because the price is predictably prohibitive. And, while the maritime equivalent of a Toyota Prius running with its battery temporarily disconnected could be a short-term sideshow, it is a situation that has hammered home the pricing volatility ahead in this difficult transition. More than 45% of the respondents cited regulatory uncertainty as being the greatest risk to shipping businesses over the next five years, indicating a growing concern about the pace and uniformity of climate measures due to be imposed on the maritime sector. This year’s COP26 climate talks may not have melted the glacial pace of regulatory progress in shipping, but this year the priority has noticeably shifted to the quick wins and first-mover projects that can create demand signals and secure public sector and private investment quickly.

The pace of change is not being led by shipping; rather its customers and financiers are forcing the decisions, while the phase of setting idealistic emissions-reduction goals down the line is coming to an end. Those shipowners brave enough to look beyond this immediate set of challenges are now considering the prospects of a multi-tiered industry in which scale and access to environmental, social, and governance-compliant cash determine business models and access to markets. And don’t forget that this energy transition — which, to date, has been viewed as a long-term risk and treated accordingly — will translate into periods of extraordinary volatility in not only commodity prices, but also seaborne trade volumes. The fact that this comes with a long list of associated risks, from a looming workforce skills crisis to a debt crisis to managing the existing fleet to zero-carbon, only serves to remind the current C-suite generation that their strategic planning is going to have tangible consequences that will be felt under their tenure, as well as that of their successors. Next year may not be the one in which owners address the existential threat looming over them, but there is no hiding from the fact that this industry must transition away from fossil fuels as the dominant marine energy source within the lifespan of today’s newbuilt ships — and do so amid unprecedented regulatory, financial, and technical uncertainty. So, enjoy the relative calm of Omicron threatening to disrupt 2022’s brief window of balance, because it will not last.

Consensus is building that 2022 will see weaker dry bulk rates than 2021’s spectacular run. However, that does not mean a rate collapse — far from it; analysts are expecting another profitable year for owners and operators. In 2021, the sector saw earnings hit multi-year highs as economies recovered from the pandemic effect, leading to strong demand growth. Coupled with that was increased congestion as tight travel restrictions and quarantine caused a snarl-up at ports around the world, as did bad weather. China’s ban on Australian coal added to idled vessels.

The containerization effect led to increased demand for the smaller-sized bulk carriers, which have performed well throughout 2021. Low fleet growth also played its part, and the muted orderbook will likely allow a floor to develop, preventing rates from falling through it. While there are question marks over iron ore and coal trades, strong grains and minor bulks should hold through 2022, according to analysts. Ship brokerage Braemar ACM expects “higher highs” to dominate the market next year, although the peak in the current cycle could be in mid-2022. New efficiency regulations in 2023 will likely add to strength as vessels are forced to slow down, effectively curtailing overall supply, its dry bulk analyst Nick Ristic said.

Dry bulk demand growth is estimated at 3%-4%, largely tracking global gross domestic product forecasts for 2022, while supply growth is pegged at around 2%-2.5%, a scenario boding well for rates. Even if demand ends up lower, it will still exceed supply estimates. “The market is set up for a good year in 2022,” said Jefferies senior vice-president of equity research Randy Giveans. Yet there are exogenous factors to consider, such as congestion and how the Australia-China political spat will develop and influence rates. Mr. Giveans estimates that capesize rates could average $26,000 per day in 2022, from $33,500 in 2021, with kamsarmaxes at $23,000, down from $27,000, and Supras at $22,000 from about the $27,000 level. Handysizes, meanwhile, are seen averaging $20,000, down from $25,500 in 2021.    

While supply-demand fundamentals will undoubtedly lead to a positive rates story, there are some more uncertainties relating to China’s economic performance, real estate, steel production, and the new coronavirus variant Omicron and its impact on the recovering global industrial output. Other factors include iron ore volumes from Brazil, and whether coal trades will keep pace. Headwinds to China’s economy are a cause for concern, given the dry bulk market’s heavy dependence on shipping commodities there. According to Wood Mackenzie, GDP growth could slow to 5.4% in 2022 from 8.1% this year. It is expected to decelerate to 4% in the final quarter of 2021 from 4.9% in the previous three months.

China’s steel output fell 23% in October to 71.6 MMT, the lowest level of the year, as the government tries to cut pollution ahead of the winter Olympics, which are being held in Beijing in February. In the first 10 months of 2021, its production has contracted by 0.7% versus the same period in 2020, according to the latest statistics by the World Steel Association. While that is bearish news for the capesize and panamax segments — given they are workhorses for iron ore and coal carriage — growth in other countries, such as Japan, India, and the US, is a positive factor supporting the smaller sizes.

Besides the Evergrande debt default — albeit averted for now — new cases of coronavirus and ensuing restrictions keep worries alive. “China is a big unknown,” said Maritime Strategies International senior dry bulk analyst Alex Stuart-Grumbar. “We definitely see next year softer than this year because of weakness in China, with demand tapering off in the property sector, which will drag on capesizes,” he said. Mr. Stuart-Grumbar added that while iron ore demand looks bleak for now, coal appetite is strong, given high gas prices and shortages during what looks to be a severe winter. How dry bulk fares will depend on whether there is a ‘hard’ or ‘soft’ restructuring in the property sector, he said.

Breakwave Advisors’ founder John Kartsonas echoed these views. The futures market for next year came off over recent weeks as China started to look weak and commodities prices reflected that, he said, adding that he expects volatility to continue in 2022 as the market is increasingly sentiment driven. “If the rest of the world slows down to below the trend line, we’ll have a bad year,” he said. “We’ll have a strong year if coal ends up above expectations.” Low fleet growth — the lowest in decades — bodes well for the market, and a muted orderbook is also worth noting. Yard capacity has been constrained with containership orders, and uncertainty over future fuels has kept owners away from contracting new tonnage unless renewing their fleets. Financial considerations as newbuilding prices rise have also meant that speculative orders are unlikely. According to Lloyd’s List Intelligence, 319 bulkers have so far been delivered in 2021, mostly in the 60,000 dwt-100,000 dwt size category, out of a full-year total expected of 412, with 494 vessels expected to hit the market in 2022, based on the orderbook.

Only 72 removals were recorded in 2021, amounting to just 10 MDWT, given how lucrative the spot market has been this year. The whole fleet amounted to 929 MDWT in 2021, rising slightly to 967 MDWT in 2022, Lloyd’s List Intelligence data shows, more as a function of low scrapping rates — as the fleet is young — rather than new deliveries. So, while question marks remain over the demand evolution next year, the dry bulk market is being influenced by the supply side, with utilization across segments remaining high.  Even if demand falters, analysts are confident it will still exceed vessel supply growth. 

What a difference a year makes when it comes to US-listed dry bulk owners and the returns on capital they are offering to shareholders through quarterly dividends. In the fourth quarter of 2020, only one of the eight bulker owners under the coverage of investment bank Jefferies offered a dividend, and that was the modest $0.05 quarterly payout from Navios Maritime Partners. Flash forward 12 months and only one of the eight has not initiated a dividend — the lone holdout being Greek owner Safe Bulkers.

What is more, Jefferies is projecting three of the owners to pay yields of more than 20% in 2022 based on projected distributions in relation to their current share prices, which are currently well below net asset values (NAVs). Streetwise caught up with Jefferies analyst Randy Giveans to explore the trend. Why have the payouts come into vogue? Just how sustainable are they, and how will the returns impact valuations and attractiveness to shareholders going forward?

“It’s happening for multiple reasons,” Giveans said. “Their balance sheets are finally in great shape, the best in 10 or 15 years. Leverage ratios are down to 20% to 25% or even lower against historical averages closer to 50% to 60%.” There is also a dearth of capital expenditure requirements. Exhaust-gas scrubbers and ballast water treatment systems in most cases have already been installed and paid for. Newbuildings have ground to a halt, owing to confusion over future propulsion systems and scarcity of yard slots. “And with the strong market for the past year, free cash flow is high. When you have that combination, you can pay dividends,” he said.

Dry bulk dividend yields

^{Source: Jefferies}

So, if that’s where dividends have come from, where might they be headed from here? And how does the investor choose among the various offerings, which can be based on different formulas?

To the extent that size matters, Giveans’ top choices are Star Bulk Carriers of Greece and Genco Shipping & Trading of New York, which have both adopted high-payout models. Jefferies projects Star will pay out $5.04 in 2022, a yield of 22% based on its recent share price in the $23 range. Genco is tipped to pay $3.20, a yield of 21% based on recent share price above $15. John Fredriksen’s Golden Ocean Group also has a projected yield of 21%, with $2.02 per share expected and recent share price just under $10. But unlike Star and Genco, it has no formal policy.

Shipowners hope the payouts will improve their share valuations. Genco goes so far as to envisage a repricing of the share away from the traditional NAV model to one based on a cash-flow multiple. While that may be a big ask, Giveans said, there is basis to hope for premium valuations to NAV. But investors will need to believe the payouts are sustainable. How long will that take? “I think you want to see four quarters in a row of a solid dividend,” Giveans said. “Most people look at a one-year return. That gives you some credibility.”

US owner Eagle Bulk Shipping’s director of fleet performance Jonathan Dowsett said the bulker owner will not be contracting any newbuildings for the time being. The technological shift as the industry comes to terms with the energy transition means it is more sensible to wait a while, he argues. “I would definitely echo others in Eagle Bulk that at least in the midsize dry bulk segment right now, it’s really not the time to be ordering new ships,” he told TradeWinds. “That’s not what this segment needs.”

The fleet boss believes there is a value in waiting “a few incremental years” because of the momentum on decarbonization and all the research and development taking place on the issue. “We’re probably only a few years away from having so much more clarity on what ships in our segment should probably look like,” said Dowsett. “Right now, I don’t think there is a clear enough answer on that for new ship orders,” he added.

In the short-term, Eagle Bulk is weighing the further use of biofuels after a successful cross-Atlantic trial. But right now, the company’s emissions reduction efforts are centered around its mostly completed fleet renewal program and on improving energy efficiency and reducing fuel consumption through technical and operational initiatives, Dowsett explained. “Regardless of what fuel we’re using, we’ll want to minimize consumption of that fuel, especially in future scenarios where whatever that fuel is, it is probably going to be much more expensive than what we’re used to today,” the executive said.

In the longer term, Eagle Bulk’s strategy is, like many other owners, to look at all the various options for net zero that exist. “To say there’s a lot happening in that space would be a true understatement,” added Dowsett. He said the company is trying to be as collaborative and open-minded as possible, as demonstrated by its membership of the Getting To Zero Coalition. “We have valuable knowledge and data to share,” said Dowsett.

The red-hot container ship market may cool off substantially next year amid less demand, according to S&P Platts Global analysts. The sector saw record rates this year amid an unprecedented demand for consumer goods that was exacerbated by worldwide port congestion. The spot rate to deliver a 40-foot container from China to North America’s west coast more than tripled since the beginning of 2021, reaching $14,294 on Wednesday, according to the Freightos Baltic Index. But Platts analysts said that that astounding rate may fall by as much as 40% next year as demand wanes and logistical issues ease up, citing India’s Conbox Logistics.

“With demand expected to drop off in the first quarter, many market participants are expecting rates to fall through the year, as logistical constraints start to ease further,” the analysts wrote in a note on Wednesday. “However, this fall is not expected to be precipitous and is likely to be cushioned by a host of void sailings from the carriers.” They noted that most shippers have already placed their pre-Christmas bookings, leaving current demand tepid, while power rationing in China continues to slow manufacturing. “Looking ahead, the market’s attention is firmly on two key events in China —Lunar New Year at the start of February, and the Winter Olympics in Beijing later the same month — and demand is likely to pick up again in December as shippers gear up to ship goods before the Lunar New Year.” Rates should remain elevated through next year’s first quarter and still higher than pre-Covid-19 levels, however, as port congestion is set to “remain a major pain point” for the sector, Platts analysts said.

There are 30 box ships waiting for berths at the ports of Los Angeles and Long Beach, but that is down from as many as 100 vessels waiting in San Pedro Bay just a few weeks ago. Container ship terminals in Europe are also expected to experience congestion issues because of heightened consumer demand in September and October, the analysts wrote. “The delays are expected to continue well into the new year, as a dearth of trucking and rail capacity continue to hinder movement in the hinterlands,” they said.

The capesize bulker sector continued its upward trend on Wednesday, marking a fifth straight trading day of gains. The capesize 5TC, which takes an average of spot rates across five benchmark rates, has risen 16.3% since 1 December to $43,030 per day on Wednesday, according to Baltic Exchange data. “The market seems to be in a mini-squeeze mode, driven by weather delays and port congestion,” said John Kartsonas, founder of Breakwave Advisors and its dry bulk ETF-trading platform. “In addition, there is decent cargo flow in the Atlantic and more cargoes should be in the line.” But he said it is “difficult to say ” where capesize spot rates will continue to trend, but they are not expected to be this high going into next year. “Yet, rates in Q1 should be better than historical averages,” he said, referring to the first quarter.

The China-Japan transpacific round voyage, which takes iron ore from Western Australia to China, shot up 21% over the seven-day period to $44,485 per day on Wednesday, reaffirming speculation that China’s economic boost may bolster demand for the commodity. The People’s Bank of China announced 15 December plans to lower how much cash that banks must hold in reserve by 0.5%, a move that would release CNY 1.2trn ($188bn) in liquidity. Five capesizes have been fixed since Tuesday to carry iron ore along the benchmark Western Australia-to-China route, according to Baltic Exchange information. The average freight rate for the route has improved 12.2% since 1 December to $14.84 per tonne on Wednesday.

The 175,611-dwt Cape Sun (built 2010) scored the day’s highest freight rate with a fixture to Fortescue Metals Group on Wednesday to move iron ore from Port Hedland to China at $14.85 per day, with loading on 23 or 24 December. That’s higher than what Australian miner Rio Tinto agreed to pay on Monday when it fixed two unnamed capesizes to ship 170,000 tonnes of iron ore on the Western Australia-to-China route at between $13.35 to $13.75 per tonne.

Dry bulk shipping’s smaller asset classes saw more modest spot rate improvements over the past seven days. The panamax 5TChit $28,992 per day on Wednesday, an 11.2% gain since 1 December. The supramax 10C rose 6.2% to achieve $27,721 per day in that time frame, while the handysize 7TC climbed 1.85% to reach $28,426 per day.

The decision by the People’s Bank of China to cut the reserve requirement ratio by 0.5 percentage points has driven up sentiment in the Chinese steel and iron ore markets. The Chinese government also signaled that the real estate market will be stabilized, and iron ore prices rose by roughly 8.66% yesterday.

By cutting the reserve requirement ratio to 8.4%, some RMB1.2trn or ($181bn) will be released, allowing banks to fund projects more easily in the battered property sector as well as in infrastructure projects. Coming in as the highest since July last year, iron ore imports rose to almost 105.0 MMT last month, versus about 91.6 MMT in October. Iron ore prices for 62% Fe fines rose by $8.51 per tonne to $111.3 per tonne on a CFR-basis in Qingdao, according to Fastmarkets.

The race is on, as demand from China is visibly picking up, in what Lorentzen & Stemoco believes is a fundamental turning point. Yesterday, the Baltic Exchange reported the 5TC up by $2354/day to $41,324/day and noted that the Anglo-Australian mining company Rio Tinto took three capesize bulkers for voyages out of Dampier to Qingdao on its 170,000 tons iron ore +/- 10% stem. Rates were done at $14 and $ low 14s per ton. The Norwegian brokerage reported the market is riding higher particularly on the C5 between West Australia to Qingdao, but the Atlantic is about to strengthen in a market looking stronger. Yesterday, the Baltic Exchange posted the 5TC at $38,970 a day, up by $874 day.

Dry bulk rates across segments have increased over the past week as congestion at ports in China remains stubbornly high, with logjams at northern ports and terminals, as well as off Shanghai and Ningbo. Adding to lengthening delays to discharges in China were the temporary closure of Caofeidian and Jingjiang ports due to strong winds on December 6. Bad weather also reportedly shut some Australian ports in the past week.

The average weighted capesize time-charter was at $41,324 per day at the close on the Baltic Exchange. That is 11% higher than a week ago and is the most since October 26. Panamaxes gained 16% to $29,275 per day from a week ago. That is the highest level since November 3. “Tonnage appeared tight in both basins,” the London-based Baltic said in a weekly report of the capesize market. For panamaxes, the Atlantic basin “saw both a mineral and grain-led charge, pitted against a tight tonnage count from the Continent and Mediterranean”. Solid levels of demand were also reported from the east coast of South America.

There are 262 bulkers and ore carriers of 10,000 dwt and over totaling 20.2m dwt at anchor outside ports waiting to discharge at coal, grain, minerals and ore terminals in northern China, according to Lloyd’s List Intelligence data compiled by Lloyd’s List. These include the Huanghua bulk and grain terminals, Caofeidian, Tianjin, Tangshan, Jingjiang, Qinhuangdao, Jinzhou, Bayuquan and Yingkou terminals. That number compares with 265 ships, totaling 20.7m dwt, measured on October 22, the data shows.

Congestion remains off Shanghai and Ningbo, where there are 181 vessels of 12.7m dwt. That is lower than the 244 ships at anchor seven weeks ago. This area covers ports at Zhoushan, Majishan, Dafeng and Baosteel terminals. The lengthy delays reflect tighter immigration and quarantine policies in China, with two-week waiting periods before vessels can call at ports in line with the zero-Covid policy.

Congestion earlier in 2021 was attributed to strengthening demand for iron ore, coal, and grains, with shipments arriving outpacing terminals’ ability to handle them. But with lower manufacturing and steel output, queues today reflect delays linked to pandemic restrictions.

Breakwave Advisors said it expected the next few weeks to remain “relatively strong,” although a natural correction was likely, given the fact that cargo flows seasonally decline in the first quarter. This is priced into the futures market, with the capesize contract for the first quarter trading at about 50% below spot levels, the US-based consultant said. “The question is whether such correction will be deep enough to actually push futures even lower, and this is very difficult to predict,” it said in a note on December 7.

“However, this time around, there is an unusual circumstance that we believe is important when it comes to future rates, namely the inter-asset relationship between large vessels and small vessels. At present, smaller vessels are expected to earn more versus the larger capesize ships soon, a very unusual occurrence. Although there are valid reasons for that, we believe that such an environment will naturally provide some support for capesizes and thus we think a major correction is a low probability event.”

In the supramax and ultramax market, increased activity was seen from the US Gulf and South America, which led to tonnage tightening for prompt dates, according to the Baltic Exchange. Supras crept up 6.3% to $27,367 per day, while handysizes rose steadily to $28,224 per day, gain of 1.5% from November 30.

Average rates for dry bulk vessels are expected to be weaker than this year’s spectacular showing, but will still be at profitable levels next year, according to analysts. While demand for commodities such as grains, minor bulks and bauxite will continue to be strong, worries regarding China’s economy and real estate sector may dampen imports of iron ore and coking coal. The worries have been reflected in the forward curves, which lost steam in the fourth quarter of the year, said Braemar ACM dry bulk analyst Nick Ristic.

While he is not hugely bullish on iron ore or coal, he is positive about the other commodities, and expects that bauxite from Guinea to China will continue to be an important trade on a per-tonne basis, beneficial to capesizes. Steel trades will meanwhile benefit the smaller sizes, with the US infrastructure bill providing some import appetite. While China’s steel production slumped in the second half of this year, which was mainly politically driven in a bid to minimize pollution ahead of the Winter Olympics, a turning point could be expected in the second half of next year, he said, adding that he expects China’s steel output to recover somewhat in 2022.

He told a Breakwave Advisors webinar that what was most supportive of the dry bulk market was the muted supply growth, and “higher highs” could be expected going forward. The Energy Efficiency Existing Ship Index (EEXI), which comes into force in 2023, should have a “significant impact” on effective supply growth as vessels will have to slow down, he pointed out. Only a slight drop in speed could take out 65 capesizes from the market, he illustrated.

Norwegian owner Torvald Klaveness head of research Peter Lindstrom said that even if demand growth will slip to about 2%, it will still exceed effective fleet growth, which will provide support to rates. He expects the market to be resilient next year, although the two big uncertainties were related to China’s real estate outlook and the new strain of the coronavirus. Capesizes are estimated to average $22,000 per day next year, down from $33,000 this year, he said on a panel at the same event, adding that he was “definitely a buyer of that curve”.

Optima Shipping Services head of market analysis and intelligence Angelica Kemene expected similar average rates for capesizes in 2022, with a low of $15,000 and a high of $35,000.

Capesize owner Seanergy was however more bullish, expecting an average of $52,000-$53,000, although volatility will still be apparent. Chief executive Stamatis Tsantanis pegged the low-to-high range at about $23,000-$65,000 through the coming year.

Singapore UOB Kay Hian has increased its Alpha Picks portfolio’s exposure to the maritime sector with the addition of Sembcorp Marine. The investment bank’s Alpha Picks are its high conviction calls, usually around 10 to 12 companies, selected by its Singapore-based research team.

UOB Kay-Hian said the addition of Sembcorp Marine to the portfolio was because it believes the risk/reward from the shares has “become compelling. We have added Sembcorp Marine as we believe that the current share price has already priced in most of the company’s negatives and the outlook for the offshore renewables and drilling sector has improved markedly over the past 12 months,” the bank said. “With its SGD 1.5bn capital raising behind it, Sembcorp Marine is now in a much stronger financial position to take advantage of a potential upswing in the offshore construction sector.”

Adrian Loh, head of research at UOB Kay Hian, said importantly the capital raising proceeds can be used more ably to execute and complete the projects as well as for working capital needs for new orders and projects. “The company does not expect any more capital raisings given that its banks can see that the overall industry is improving, and that Sembcorp Marine is transitioning well into renewables,” he said. Sembcorp Marine is now the third stock to be included in the portfolio alongside long-time member Yangzijiang Shipbuilding and Japanese bulker owner Uni-Asia Group.

Uni-Asia, which has been listed in Singapore since 2007, has a combined fleet of 18 handy-sized bulkers, with 10 wholly owned and eight jointly owned. Of the 10 wholly owned bulk carriers, six are up for renewal in the second half of the financial year and three more in the first half of next year.

“We believe the perfect storm has begun for a demand surge in the dry bulk industry, where shipowners will likely benefit with the anticipation that freight rates will stay elevated into end-2022,” said analyst Clement Ho, who covers the stock.

“As charter rates remain elevated in 2022 given the industry supply shortage, our estimates suggest a revenue growth of 15% in 2022.” Ho adds that Uni-Asia has a solid dividend track record since 2017 and continued paying dividends despite a loss-making 2020. UOB Kay Hian has target prices for Sembcorp Marine, Yangzijiang Shipbuilding and Uni-Asia Group of SGD 0.11, SGD 2.00, and SGD 2.34, which represent potential upsides of 32.5%, 55% and 80% respectively.