MARCH 2020

Shipping stocks are still in the doldrums. However, tanker stocks gained 11 percent m-o-m while the other shipping sectors lost heavily.

The spreading pandemic has further dragged down most of the shipping stocks. The impact of an increasing number of infected people and farreaching lockdowns just starts to be felt in the real economy. The supply shocks with the subsequent demand shocks are moving from East to West. However, countries rebooting their economies begin to feel the negative repercussions of globalization. As their trading partners’ demand drops, there are limited incentives to switch to full capacity utilization yet.

Very slowly, one tries to get a feeling for the effects on the
domestic and global economy. Early indicators and evaluation from research institutes do not bode well. Accordingly, financial markets are very cautious and volatile to an extent never experienced before. This, of course, is hitting the shipping stocks as well. 

The tanker sector, however, does not fit into the category of falling stock prices. By contrast, the current oil price war between Saudi Arabia and Russia has brought an unprecedented boom to the tanker markets in March. As the oil markets are currently flooded with crude from the Arabian Gulf and the global oil demand forecast was drastically reduced downwards, the need for transportation and floating storage capacity sent VLCC charter rates skyrocketing. Equity markets reacted positively and rewarded tanker companies with an increase of 11 percent m-o-m. 

The massive downslide of the oil price has infected the gas sector as well. Stock markets negatively reacted to global demand for LNG expected to shrink drastically.     

Furthermore, investors become increasingly concerned that the US shale oil and gas industry may not survive such low oil and gas prices much longer and may have to shut down their wells. A lower propane and butane production would strongly reduce long-distance transportation from the US to Asia. Thus, stocks for LPG- and LNG-carrier companies took a 31 percent hit compared to the previous month.

The Notos Sentiment Index saw its temporary low in mid-March and recovered somewhat since. Still, the index remains deep in the red. Also, the bulker- and container-sub-indices have continued their fall in the reporting period. 

By contrast, the crude tanker sub-index positively reacted to last month’s improving tanker market fundamentals and made its way from its low at -0.57 back to -0.14 as of the end of March. This is very close to the level from which a positive development of tanker stocks might be expected.

In contrast to the previous month, the Notos Maritime Strategy Index fell behind its benchmark in March. While the trading strategy lost -16.0 percent m-o-m, the Dow Jones Global Shipping Total Return Index dropped by -11.5 percent.   

Our exposure focuses on the crude tanker market with the intention to benefit from the current comfortable situation for tanker-owning companies. Still, the global stock markets remain highly vulnerable to the pandemic and its aftermaths. 

Please do not hesitate to contact us if you wish to know more about our trading strategies. 

NOTOS SHIPPING INDICES | Measure the average performance of listed shipping companies in each sector
NOTOS MARITIME SENTIMENT INDEX | Measures the sentiment of global shipping markets, ranks between -1 and +1

NOTOS MARITIME STRATEGY INDEX | Discretionary trading strategy on shipping risks


This document has been prepared and approved by Notos Consult GmbH and is for informational purpose only. The information presented in this report is intended for the recipient to whom it was delivered. Reproduction or distribution of this document in whole or in part is not permitted without the express written consent of Notos Consult GmbH.
This document contains forward-looking statements. We caution the reader that forward-looking statements are not guarantees of future performance. Past returns are no indication of future returns. The development of the industry,
markets and companies described in this document, may differ materially from the forward-looking statement contained herein.

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