Owner-Oriented Investment Research and Commentary - Have a private comment or question? Email us at commonstocksense@gmail.com

Wednesday, July 7, 2010

Shipping News - Global Economy Better or Worse? You Be the Judge

We can't help but again share headlines from The Journal of Commerce to tell the story of what's really happening in the global economy. By and large, the good news keeps coming and it's not simply feel good, fluffy headlines, but news substantiated by hard figures that suggest global trade is healthy and increasing. This is inline with the global manufacturing expansion we mentioned the other day. Importantly, the news also touches the United States and implies that activity stateside is more vibrant than mainstream headlines reveal.

Following on earlier, positive headlines from the global shipping industry, here is the latest:

CMA CGM Sets Investor Deal Deadline 
CMA CGM plans to reach agreement with new investors over a stake in the ocean container carrier by the end of July, the company said as it unveiled sharply higher first quarter profit and revenue.

Container Shipping Rates to Hit Pre-Downturn Levels, Maersk Says 
Ocean container freight rates likely will return to levels reached before the global economic recession by the end of this year, according to Maersk Line.
Far East-U.S. Container Traffic Hit Record in June 
A shipping consultant estimated ocean container shipments from Asia to the U.S. at 1.23 million 20-foot equivalent units in June, a 32 percent increase on a year ago driven by Chinese exports.

TUI Hikes Hapag-Lloyd Profit Forecast 
TUI AG expects its 43.3 percent stake in Germany's biggest ocean carrier Hapag-Lloyd to generate higher profit than initially forecast due to a "notable" recovery in global container shipping.
Freight Index Jumps 9.1 Percent in June 
The closely watched Cass Freight Index for shipments grew 9.1 percent in June over the previous month, accelerating at a pace that contrasted with other slowing economic signals and reaching a new high for the recovery.
Hong Kong Airport Sets Freight Record 
Air freight exports out of Hong Kong soared 51.5 percent in May, pushing Hong Kong International Airport to what appears to be the busiest air cargo month in its history, according to figures released by the airport authority.

To be balanced, here's one negative headline (although if you read the article, it says "Despite this concern, Drewry increased its global demand growth projection for 2010 to 8.5 percent."):

Drewry Warns of Weaker Container Recovery 
The severe backlog of container shipments delayed by the lack of vessel space is hiding the fact that peak season demand may be less than forecast, according to Drewry Shipping Consultants' latest Container Forecaster.

We continue to sleep well with our container shipping companies Seaspan (SSW) and Global Ship Lease (GSL), both of which are offered by the Market at low multiples of earnings and distributable cash flow. As an example, GSL is currently trading at only 4.1 times annualized 1Q10 earnings and, in our view, the primary risk factor of a potential CMA CGM default (counter-party risk) continues to diminish.

Happy investing,

Jeffrey Walkenhorst
CommonStock$ense

Disclosure: long SSW, GSL.

© 2010 Jeffrey Walkenhorst
Please see important Risk Factors & Disclaimer

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.