Bulk Shipping Companies Fell More Than Airline Stocks... "Expecting Supply and Demand Improvement in the Second Half"

Korea Investment & Securities Report, Pan Ocean and Daehan Shipping Stock Price Improvement Outlook

[Asia Economy Reporter Minji Lee] Claims have emerged that shipping companies, whose stock prices have fallen more sharply than airlines this year, will recover quickly due to the completion of industrial restructuring. This is based on the judgment that the supply and demand of bulk carriers could improve from the second half of the year through 2021.

▲Bulk carrier (reference photo)

According to data released by Korea Investment & Securities on the 26th, Pan Ocean and Korea Line Corporation saw their stock prices fall by about 25% and 18% respectively this year. Amid a sluggish start from the beginning of the year due to the IMO 2020 environmental regulations, the average Baltic Dry Index (BDI) in the first quarter dropped 25% year-on-year due to the impact of COVID-19 and iron ore production cuts.

Choi Go-woon, a researcher at Korea Investment & Securities, explained, “The stock prices of bulk carriers fell more sharply than airlines due to overlapping concerns about the global economic crisis and fatigue over uncertainty,” adding, “If the airline industry’s restructuring is just beginning, the bulk shipping market has undergone years of reorganization, and this first half of the year will be the last hurdle.”

Looking at the shipping market in April, tanker freight rates surged due to a sharp drop in oil prices, and container ship demand decreased, while bulk shipping showed signs of rebound. The BDI recovered 700 points in three months, and the Baltic Capesize Index (BCI) rose from negative territory to the 1000-point range in about two months, raising expectations for market normalization. The scrapping of ships in the first quarter increased by 97% year-on-year, indicating that the oversupply situation has been resolved.

In fact, Pan Ocean and Korea Line Corporation are expected to maintain stable quarterly operating profits in the 30 billion KRW range thanks to long-term shipping contracts. Furthermore, from the second half of the year, as iron ore production recovers and deferred demand from China normalizes the market, the scrapping effect is expected to fully impact freight rates.

Researcher Choi Go-woon diagnosed, “Pan Ocean has a debt ratio of only around 50%, giving it top-tier cost competitiveness,” and added, “In the case of Korea Line Corporation, it is judged that the noise surrounding the change of the largest shareholder will subside over time. In the short term, attention should be paid to the fact that the largest shareholder, SM Highplus, is very interested in boosting Korea Line Corporation’s stock price.”

This content was produced with the assistance of AI translation services.