Shipping Industry in a Mode of Discounting the Global Recovery

Shipping is by its nature an especially volatile and unpredictable market in such an extent that many investors find it difficult to deal with and therefore they often prefer to refrain from investing in the sector stocks. During the unprecedented events of 2020 and amid the log-lasting health crisis, the shipping market suffered big losses, experienced “unthinkable” conditions in terms of supply and demand but also bounced back in the most unconventional way.

This time as the new year of 2021 unfolds and we have been running the second month of the year, it is becoming conspicuous that shipping stocks are constantly discounting the coming months will forge a much better period as compared to what the previous year of 2020 was for the shipping industry. The argument again is obvious: there is nothing that can stop the global recovery following a potential successful fight against the pandemic. Vaccines are in place and keep coming, the biggest economies like China, USA and Europe cannot do worse and more likely will be better off sometime within the year and moreover, global trade routes will be fully restored letting the shipping business flourish again.

On the top of that, the charter rates in the various sub-segments are quite persistent showing no signs of major retreatment, a trend that makes participants, ship-owners, traders, investors and analysts to stand as vivid believers of a continuous uptrend.

FIGURE 1: Baltic Dry Index (BDI) – 1 Month up to February 17th, 2021

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics

FIGURE 2: Baltic Dry Index (BDI) – 1 Year up to February 17th, 2021

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics

FIGURE 3: Baltic Dry Index (BDI) – 5 Years up to February 17th, 2021

[Bloomberg ticker: BDIY:IND, BDI Baltic Exchange Dry Index]

Source: Bloomberg, Trading Economics

All above are just a list of observations of what has been happening so far in the shipping market and it is yet to be proved whether it can be treated as sustainable evidence of the bigger picture. However, as discussed in our previous blogs, the 5-year trend of the shipping market as it is illustrated by the Baltic Dry Index remains upward looking despite the interim cycles of high volatility (especially in years 2019 and 2020) and this by itself is a fact worth mentioning in order to make it the basis of the overall discussion.