MARINE Stocks on the Rise: Analysts Optimistic on Continued Growth
Industry Upcycle, Supply Crunch, and Rebound in Global Demand Drive Gains
Yangzijiang Shipbuilding had a nearly 80 per cent increase in its share price over the past year, while Marco Polo Marine was up by more than 12 per cent. Seatrium jumped about 52 per cent in the past six months, and Nam Cheong is up nearly 150 per cent in the same period.
Analysts Cite Factors for Growth
Analysts listed factors such as an industry upcycle, supply crunch, and rebound in global demand.
Industry Experts Weigh In
Lim Siew Khee, head of Singapore research at CGS International, said: "The shipping industry is undergoing an ordering upcycle. Thanks to the increased shipping activity since Covid-19 and subsequent elevated freight rates, ship liners have built strong balance sheets. This has led to record-high orders for shipyards such as Yangzijiang."
Capacity Constraints and Demand for Offshore Support Vessels
Shipyard capacity is tight, with most orders booked for 2028 onwards. Demand for offshore support vessels is driven further by exploration and production activity in the oil and gas (O&G) industry, said Lim.
Greener Vessels and LNG Carriers
Analysts pointed out that the International Maritime Organisation’s regulations for sulfur emissions for the shipping industry implemented in 2020 (IMO 2020) have boosted demand for greener vessels. The regulations stipulated that the global upper limit on the sulphur content of ships’ fuel oil must be reduced to 0.5 per cent (from 3.5 per cent), with the goal of lessening harmful pollution emitted from ships.
Conclusion
The marine sector has been experiencing a period of significant growth, driven by a combination of factors including an industry upcycle, supply crunch, and rebound in global demand. Analysts are optimistic that this trend is likely to continue, with many seeing this as a decade-long cycle if capacity expansion remains limited.
Frequently Asked Questions
Q: What are the key drivers of growth in the marine sector?
A: The key drivers of growth in the marine sector are an industry upcycle, supply crunch, and rebound in global demand.
Q: How has the shipping industry changed since the implementation of IMO 2020?
A: The implementation of IMO 2020 has boosted demand for greener vessels, with many shipowners initiating fleet rejuvenation programs to meet the regulations.
Q: What are some of the key stocks to watch in the marine sector?
A: Some of the key stocks to watch in the marine sector include Yangzijiang Shipbuilding, Marco Polo Marine, Seatrium, and Nam Cheong.
Q: What are the implications of the supply crunch for shipyards?
A: The supply crunch has led to a more than double rebound in vessel charter rates since 2021 for vessel owners such as Nam Cheong, Mermaid Maritime, Marco Polo, and others.
