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While estimates vary depending on the source and region, maritime transport of goods is by far the most preferred mode across the world, accounting for 80-90% of the total volume transported.
Because ships take years to build, total shipping capacity generally changes only gradually over time, as global trade of merchandise increases. As global trade soared in the last few decades, ships could operate at higher capacity, thus lowering costs and also leading to the building of larger and larger ships. This came with its own share of challenges, since larger ships take longer to load and pressure the port and other infrastructure.
This, in turn, led to what has been described as the greatest transport revolution of the 20th century, i.e. containerization. Today, around 70% of global shipping uses containers that increase the efficiency of the loading process.
Maritime transport owes its popularity to its relatively low rates. So while air freight has been growing much faster in recent years, this trade is largely restricted to high-value items and finished goods that usually also have to reach the customer quickly.
Sea trade is a little different, consisting of raw materials mainly. Raw materials like petroleum travel in tankers from the Middle East and Africa to other parts of the world. Dry cargo, mainly bulk commodities like iron ore, coal, grain, phosphates and bauxite, as well as non-ferrous metal ores, feed and fertilizers, are carried in Capesize (150,000 tons capacity, carrying mainly iron ore and coal) and Panamax (60,000-70,000 tons capacity, carrying mainly coal and grain) vessels. Supramax (48,000-60,000 tons) and other vessels and liners carry general cargo, usually in containers.
According to the United Nations Conference on Trade and Development (UNCTAD), the global fleet increased by 81 million deadweight tons (dwt) to 2.1 billion dwt between Jan 2020 and Jan 2021. Bulk carriers grew from a 36% share to a 43% share between 2010 and 2020; oil tankers shrank from a 35% share to a 29% share; and general cargo liners also shrank from 8% to 4%.
Construction was mainly in China (40.1%), Korea 25.2% and Japan 24.9%. Greece top owner with 18% of the total fleet, followed by Japan with 11%, China 11%, Singapore 7%, Hong Kong (5%), Europe 41% and North America 6%.
Shipping volumes have historically increased faster than global GDP. Since capacity doesn’t change as rapidly, increased volumes have led to higher rates. This has been highly beneficial for maritime trade and the players in this industry.
Of course, the global pandemic had a severe impact on trade volumes in 2020 and it came on top of a sluggish 2019, when trade wars arrested some of the trade. Things are looking up this year however, as manufacturing gathers momentum.
Since dry bulk goods are mainly raw materials, growth in this segment is a leading indicator of an expanding manufacturing sector. And since capacity is more or less fixed, shipping rates are a barometer of the segment’s performance.
Accordingly, the Baltic Dry Index (BDI) – a proxy for global dry freight rates across 23 routes – surged to a 19-month high on April 21. The increase was mainly driven by higher rates for iron ore shipments between Brazil and China, and also from western Australia to China. On May 5, the BDI rose 57 points, with gains across capesize, panamax and supramax vessels.
Given the above, the Zacks Transportation - Shipping industry (top 37% of Zacks-ranked industries) looks pretty good right now. The industry has returned 26.1% year to date.
And as the global economy bounces back from the pandemic, trading volumes should remain high, leading to continued strength in the industry in the foreseeable future. As a result, the following Zacks Rank #1 (Strong Buy) stocks are worth picking up today-
Eagle Bulk Shipping Inc.
Eagle Bulk Shipping is the largest U.S. based owner of Handymax dry bulk vessels. Handymax dry bulk vessels range in size from 35,000 to 60,000 dwt, and transport cargoes like iron ore, coal, grain, cement and fertilizers.
This year, the company is expected to grow revenue and earnings by 58.9% and 299.1%, respectively. The Zacks Consensus Estimate for the year jumped $4.06 (149.8%) in the last 30 days.
Euroseas Ltd. consolidates the ship owning interests of the Pittas family of Athens, Greece, which has been in the shipping business over the past 136 years. Euroseas operates in the dry cargo, dry bulk and container shipping markets. Its management and operations are carried out by Eurobulk Ltd. The company employs its vessels on spot and period charters and through pool arrangements.
This year, the company is expected to grow revenue and earnings by 46.5% and 674.1%, respectively. The Zacks Consensus Estimate for the year jumped 93 cents (26.1%) in the last 30 days.
Genco Shipping & Trading Ltd. is a owns ships and transports iron ore, coal, grain, steel products and other dry bulk cargoes along shipping routes. The company’s owned fleet consists of Capesize, Panamax, Ultramax, Supramax, Handymax and Handysize vessels.
This year, the company is expected to grow revenue and earnings by 39.1% and 722.9%, respectively. The Zacks Consensus Estimate for the year jumped $1.31 (150.6%) in the last 30 days.
Piraeus, Greece-based Navios Maritime Partners L.P. is an international owner and operator of dry cargo vessels. It transports dry bulk commodities like iron ore, coal, grains, fertilizers and charters its vessels under medium to long-term charters.
This year, the company is expected to grow revenue and earnings by 122.4% and 946.1%, respectively. The Zacks Consensus Estimate for the year jumped $2.46 (35.9%) in the last 30 days.
Wanchai, Hong Kong-based Orient Overseas (International) Limited, through its subsidiaries, primarily offers container transport and logistics services, ports and terminals, and property investment. It also provides freight management services, extensive domestic distribution services and supply-chain management. Its container terminals form an integral part of its international containerized transportation business.
This year, the company is expected to grow revenue and earnings by 76.3% and $26.91, respectively. The Zacks Consensus Estimate for the year jumped from $7.45 to $28.15 in the last 30 days.
Star Bulk is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk segment. Star Bulk's vessels transport iron ore, coal and grain as well as minor bulk loads such as bauxite, fertilizers and steel products. Star Bulk is headquartered in Athens, Greece. Currently, Star Bulk has an operating fleet of nine dry bulk carriers and is in a definitive agreement to acquire two more dry bulk carriers.
This year, the company is expected to grow revenue and earnings by 44.1% and 2041.2%, respectively. The Zacks Consensus Estimate for the year jumped $1.33 (57.6%) in the last 30 days.
Based in Haifa, Israel, ZIM Integrated Shipping Services Ltd. along with its subsidiaries, provides container shipping and related services. The company offers dry, reefer, project, out of gauge, breakbulk and dangerous cargo services; It also offers inland transport services.
This year, the company is expected to grow revenue and earnings by 39.7% and 96.0%, respectively. The Zacks Consensus Estimate for the year jumped $2.18 (28.9%) in the last 30 days.
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Image: Bigstock
Shipping Stocks Are Ripe for the Picking
While estimates vary depending on the source and region, maritime transport of goods is by far the most preferred mode across the world, accounting for 80-90% of the total volume transported.
Because ships take years to build, total shipping capacity generally changes only gradually over time, as global trade of merchandise increases. As global trade soared in the last few decades, ships could operate at higher capacity, thus lowering costs and also leading to the building of larger and larger ships. This came with its own share of challenges, since larger ships take longer to load and pressure the port and other infrastructure.
This, in turn, led to what has been described as the greatest transport revolution of the 20th century, i.e. containerization. Today, around 70% of global shipping uses containers that increase the efficiency of the loading process.
Maritime transport owes its popularity to its relatively low rates. So while air freight has been growing much faster in recent years, this trade is largely restricted to high-value items and finished goods that usually also have to reach the customer quickly.
Sea trade is a little different, consisting of raw materials mainly. Raw materials like petroleum travel in tankers from the Middle East and Africa to other parts of the world. Dry cargo, mainly bulk commodities like iron ore, coal, grain, phosphates and bauxite, as well as non-ferrous metal ores, feed and fertilizers, are carried in Capesize (150,000 tons capacity, carrying mainly iron ore and coal) and Panamax (60,000-70,000 tons capacity, carrying mainly coal and grain) vessels. Supramax (48,000-60,000 tons) and other vessels and liners carry general cargo, usually in containers.
According to the United Nations Conference on Trade and Development (UNCTAD), the global fleet increased by 81 million deadweight tons (dwt) to 2.1 billion dwt between Jan 2020 and Jan 2021. Bulk carriers grew from a 36% share to a 43% share between 2010 and 2020; oil tankers shrank from a 35% share to a 29% share; and general cargo liners also shrank from 8% to 4%.
Construction was mainly in China (40.1%), Korea 25.2% and Japan 24.9%. Greece top owner with 18% of the total fleet, followed by Japan with 11%, China 11%, Singapore 7%, Hong Kong (5%), Europe 41% and North America 6%.
Shipping volumes have historically increased faster than global GDP. Since capacity doesn’t change as rapidly, increased volumes have led to higher rates. This has been highly beneficial for maritime trade and the players in this industry.
Of course, the global pandemic had a severe impact on trade volumes in 2020 and it came on top of a sluggish 2019, when trade wars arrested some of the trade. Things are looking up this year however, as manufacturing gathers momentum.
Since dry bulk goods are mainly raw materials, growth in this segment is a leading indicator of an expanding manufacturing sector. And since capacity is more or less fixed, shipping rates are a barometer of the segment’s performance.
Accordingly, the Baltic Dry Index (BDI) – a proxy for global dry freight rates across 23 routes – surged to a 19-month high on April 21. The increase was mainly driven by higher rates for iron ore shipments between Brazil and China, and also from western Australia to China. On May 5, the BDI rose 57 points, with gains across capesize, panamax and supramax vessels.
Given the above, the Zacks Transportation - Shipping industry (top 37% of Zacks-ranked industries) looks pretty good right now. The industry has returned 26.1% year to date.
And as the global economy bounces back from the pandemic, trading volumes should remain high, leading to continued strength in the industry in the foreseeable future. As a result, the following Zacks Rank #1 (Strong Buy) stocks are worth picking up today-
Eagle Bulk Shipping Inc.
Eagle Bulk Shipping is the largest U.S. based owner of Handymax dry bulk vessels. Handymax dry bulk vessels range in size from 35,000 to 60,000 dwt, and transport cargoes like iron ore, coal, grain, cement and fertilizers.
This year, the company is expected to grow revenue and earnings by 58.9% and 299.1%, respectively. The Zacks Consensus Estimate for the year jumped $4.06 (149.8%) in the last 30 days.
Euroseas Ltd. (ESEA - Free Report)
Euroseas Ltd. consolidates the ship owning interests of the Pittas family of Athens, Greece, which has been in the shipping business over the past 136 years. Euroseas operates in the dry cargo, dry bulk and container shipping markets. Its management and operations are carried out by Eurobulk Ltd. The company employs its vessels on spot and period charters and through pool arrangements.
This year, the company is expected to grow revenue and earnings by 46.5% and 674.1%, respectively. The Zacks Consensus Estimate for the year jumped 93 cents (26.1%) in the last 30 days.
Genco Shipping & Trading Ltd. (GNK - Free Report)
Genco Shipping & Trading Ltd. is a owns ships and transports iron ore, coal, grain, steel products and other dry bulk cargoes along shipping routes. The company’s owned fleet consists of Capesize, Panamax, Ultramax, Supramax, Handymax and Handysize vessels.
This year, the company is expected to grow revenue and earnings by 39.1% and 722.9%, respectively. The Zacks Consensus Estimate for the year jumped $1.31 (150.6%) in the last 30 days.
Navios Maritime Partners LP (NMM - Free Report)
Piraeus, Greece-based Navios Maritime Partners L.P. is an international owner and operator of dry cargo vessels. It transports dry bulk commodities like iron ore, coal, grains, fertilizers and charters its vessels under medium to long-term charters.
This year, the company is expected to grow revenue and earnings by 122.4% and 946.1%, respectively. The Zacks Consensus Estimate for the year jumped $2.46 (35.9%) in the last 30 days.
Orient Overseas International Ltd. (OROVY - Free Report)
Wanchai, Hong Kong-based Orient Overseas (International) Limited, through its subsidiaries, primarily offers container transport and logistics services, ports and terminals, and property investment. It also provides freight management services, extensive domestic distribution services and supply-chain management. Its container terminals form an integral part of its international containerized transportation business.
This year, the company is expected to grow revenue and earnings by 76.3% and $26.91, respectively. The Zacks Consensus Estimate for the year jumped from $7.45 to $28.15 in the last 30 days.
Star Bulk Carriers Corp. (SBLK - Free Report)
Star Bulk is a global shipping company providing worldwide seaborne transportation solutions in the dry bulk segment. Star Bulk's vessels transport iron ore, coal and grain as well as minor bulk loads such as bauxite, fertilizers and steel products. Star Bulk is headquartered in Athens, Greece. Currently, Star Bulk has an operating fleet of nine dry bulk carriers and is in a definitive agreement to acquire two more dry bulk carriers.
This year, the company is expected to grow revenue and earnings by 44.1% and 2041.2%, respectively. The Zacks Consensus Estimate for the year jumped $1.33 (57.6%) in the last 30 days.
ZIM Integrated Shipping Services Ltd. (ZIM - Free Report)
Based in Haifa, Israel, ZIM Integrated Shipping Services Ltd. along with its subsidiaries, provides container shipping and related services. The company offers dry, reefer, project, out of gauge, breakbulk and dangerous cargo services; It also offers inland transport services.
This year, the company is expected to grow revenue and earnings by 39.7% and 96.0%, respectively. The Zacks Consensus Estimate for the year jumped $2.18 (28.9%) in the last 30 days.
One-Month Price Performance
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
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