Money Today reporter Kim Chang-hyun | 2024.01.12 13:25
Today’s point
As concerns arise about the blockage of the Red Sea and the Strait of Hormuz, shipping companies are drawing attention. This is due to the expectation that if the company returns to a distant route instead of a closer route, freight rates will increase and related stocks will benefit. Financial analysts predict that freight rates will continue to rise for the time being due not only to geopolitical risks but also environmental regulations.
At 11:15 on the 12th, Heung-A Shipping is trading on the stock exchange at 4,065 won, up to the price limit (29.25%). Korea Shipping (18.53%), HMM (3.62%) and Pan Ocean (1.13%) are also strong.
The reason shipping company stocks rose on this day is because geopolitical conflicts continue on major shipping lanes around the world. Last December, Yemen’s Iran-backed Houthi rebels seized the British-owned Galaxy Leader vessel as it crossed the Red Sea, declaring support for the armed Palestinian political faction Hamas. The Red Sea is a key trade route for global trade, responsible for 30% of global maritime container traffic and 12% of merchandise trade.
Subsequently, Houthi rebels continued to launch missile attacks against civilian vessels. As merchant ships crossing the Red Sea were attacked one after another, Maersk, German Hapaak-Reuth, Swiss MSC and French CMA-CGM declared a suspension of operations in the Red Sea. As a result, on the 11th (local time), the United States and Britain launched air strikes against Houthi rebels in Yemen, but some fear for an escalation of the war.
On the same day, the Iranian Navy announced that it had captured the American tanker St. Nicholas in the Strait of Hormuz, further increasing tensions. The Strait of Hormuz, which connects the Gulf Sea and the Gulf of Oman, is the maritime access route for major oil-producing countries such as Saudi Arabia and Kuwait, and through which 1/3 of natural gas passes world (LNG) and 1/6 of the world’s oil passage.
Due to geopolitical risks, the Shanghai Container Freight Index (SCFI) rose to 1896.65 on day 5. It has been 1 year and 2 months since SCFI broke above the 1800 level.
It is also good for shipping companies that the International Maritime Organization (IMO) Carbon Intensity Index (CII) regulations will be introduced starting this year. CII is a value that indexes the amount of carbon dioxide through ship operation information such as fuel usage and operating distance to assess whether carbon emission reduction has been achieved. Because commercial technology to control carbon dioxide emissions is still lacking, we currently have to respond to regulations by reducing the rate. Consequently, as the number of operational days increases, pressure to increase freight rates is expected to increase.
Kim Young-ho, researcher at Samsung Securities, said: “As transit through Suez is limited due to geopolitical risks, an upward trend in ocean freight rates is confirmed.” rates in the short term, as the number of sailing days increases due to environmental regulations that will be strengthened starting this year.”.
At this point researcher Kim selected Korea Shipping as the best option among the bulk cargo shipping companies. The analysis is that if the freight rate index increases and tanker market conditions improve in the future, performance will begin to seriously improve. He said: “As of the 5th, Korea Shipping’s stock price is trading at 0.38 times its forecast price-to-book ratio (PBR) for 2024, which represents more than half a discount to the peer’s average overall by 0.88 times”. He added: “Performance continues to improve. “In a situation where bulk freight rates are expected to improve, the share price has fallen excessively,” he explained.
For Pan Ocean, upward pressure on freight rates due to CII regulations will have a positive effect on its operating performance, but the merger and acquisition (M&A) of parent company Harim Holdings and HMM is expected to weigh on its share price. Lee Jae-hyuk, researcher at E-Best Investment & Securities, said: “Concerns about raising capital to finance the acquisition of HMM are weighing on HMM’s share price.”
Oil tanker passing through the Strait of Hormuz. /Reuters = News 1
[저작권자 @머니투데이, 무단전재 및 재배포 금지]
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