Hormuz Closure

Watch the Hummus. 

Container Shipping Rates Rising

Danaos is going to outperform if container shipping prices rise. 

Ukraine grain shipments plunge in March

Grain shipments were 4 times lower in March compared to February. Since potash is also dry bulk like grain, we can conclude potash shipments are also falling off a cliff.

Russia's Plan

Russia is outlining their plan. It is crucial to read and understand this article to position yourself. We are entering a new era and not going back.

In March, logistic supply chains collapsed.

- European ports ban imports/exports from/to Russia (Rotterdam, Antwerp and Hamburg). Azov-Black Sea is closed.

- Container shipping companies suspend cooperation with Russia (95% freight import to Russia) (MSC, Maersk, CMA and Hapag-Lloyd) (St.-Petersburg, Novorossiysk).

- Air freight is closed (FedEx, UPS and DHL).

- Railway and automobile routes closed between Poland - Baltic States - Belarus - Ukraine - Russia.

The consequences are:

- Higher freight rates.

- Trade increases between Russia - China by rail.

- Increase in price of uranium, coal, oil products, natural gas, metals, timber, neon, vegetable oil, fertilizers, grain, expecially for the world ex-Russia/China.

HARPEX Index Container Rates

The HARPEX index shows the container shipping rates. When it rises, this means there is demand for container ships or it is a sign that there are supply chain problems contributing to inflation.

Orderbook Vs. Shipping Rates

The orderbook as a percentage of total fleet peaked in 2008 at 50%. Today, the orderbook to fleet level is at 20%, so there are not a lot of ships being built. Even if they are being built, it takes around 2 years to build one.

History shows that when the orderbook to fleet ratio is low, the baltic dry index spikes. This is because shipping rates rise due to a constraint in supply of ships. Once the orderbook to fleet ratio rises again to a certain level, the baltic dry index will start to go down again.

 

For more info on container shipping, go here.

Container Shipping Market

Freight rates for bulk shipping have gone up a lot, so what's the outlook for container shipping?

The container shipping market is going to grow at 8.5% per year.

All continents will see growth.

 

Growth will only accelerate.

The fleet is almost being used at full capacity and orderbooks are at all time lows.

Supply is constraint, we don't see any new ships being built. 

A lot of ships are ageing and will come off the market.

Danaos Corporation trades at PE of 6 and is at book value. This is a good buy.

Container Shipping Inflation

Container shipping is booming. 

Baltic Dry Index Vs. Bulk Shipping Rates

The Baltic Dry Index is correlated to the bulk shipping rates.

The Capesize vessels 180000 dwt are mainly used for iron ore, while the Supramax (75000 dwt) and Handymax (58000 dwt) are used for copper. 

Bulk Shipping Rates Soaring

We are on track to see huge inflation, especially in the base metal sector as bulk shipping rates soar.