Shipping sector monthly tracker in Nov., 2008: dry bulk market confidence is collapsing – Yu Jun, Ji Yuntao and Xie Congjun – Neutral (Downgrade) BDI collapsed incredibly this month. The average BDI was 1807 points, down by 66% compared with the previous month. Super low freight which even can’t cover variable costs is leading to a cash flow crisis. A demand vacuum led to the extreme correction of freight The mix of many factors, including downward trend of upstream industries’ demand, record high storage of ore and the intention of buying after ore price falling, led to demand vacuum now. As to when BDI will rebound, investors are advised to watch out for when steel price begin to rebound and domestic iron ore inventory to be de-stocked faster. After the rebound, we expect a long-run stage of stagnancy. Tanker market turned weak, ship owner doubt if high season will appear in next three month. In Oct, the average monthly BDTI was 1377 points, down by 8% m-o-m. The average monthly BCTI was 1204 points, down by 16% m-o-m. Due to concerns about oil demand of USA and Europe, freight of all kinds of vessels and on all routes went down obviously in late Oct. The freight of crude tanker will come under downside pressure in next year. Because of bad expectation of global economy, IEA adjusted their forecast of oil demand in next two years. And at the same time, the supply of crude tanker will increase more than 10% in 2009, an obvious over-supply will blow the freight. Industry and company risks. The economic growth pace slows down dramatically; the interest rate goes up greatly; natural disaster occurs. Industry rating and stock recommendation. Basing on the forecast of industry trend, we maintain the investment rating of “neutral” for the shipping industry. | 
发表于 2008-11-13 11:19
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