The New Commodity Cycle: A Bonanza for Shipping

We had our Expert committee at ANACONDA last week and the CEOs of Flex, Scorpio and 2020 Bulkers, all part of our group, confirmed bullish trades with China. Global commodities are up and so are shipping equities, in particular Dry Bulk. Whilst US companies have already rallied 40% ytd, European ones are still affordable as the commodity cycle may just be at the beginning of a decade long period. Inventories in China are still normal or sub normal and we expect the import flow to continue. The Green revolution with its skyrocketing needs in nickel, silver, copper, steel, rar earths will lead the way and 90% of this Green electricity revolution will take place in South East Asia.

We are getting bullish on tankers although the VLCC day rates are still low and show little short term signs of improving. Nonetheless, should the vaccination campaigns warranty a global re opening of the World economy in Q4, we may expect OPEC + to start producing more and the need for tankers to increase. In an environment with little new capacity available, we may see a fast recovery of tanker equities and we prefer to be early than late. Whilst the cold weather has moved from NE ASIA to Europe and the USA, the JKM/HENRY HUB spread has collapsed from a high of $ 18 per Mbtu four weeks ago to $ 3 now. It is still much better than in Spring of 2020 but less supportive of LNG and Propane exports from the USA to Europe and the SE Asia. We may see cargo cancellations but we remain structurally bullish on LNG tankers as the shift from Coal fired power plants to gas will trigger a secular increase of the gas market for the decade to come