Thursday, August 04, 2011

Shipping Troubles In August 2011

The news gets worse everywhere you look, and now global economic weakness is hitting the shipping industry.  Tankers have been hurting for a while and watching oil prices come down from their recent highs can't be fun.  Now shippers need to worry about additional "green taxes" on those ships that don't meet environmentally benign fuel standards.  Targeted taxes are of course a hidden boon to shipbuilders who can fulfill new orders for those fuel efficient hulls.  The declining health of the industry means those new orders will be a long time coming.  Container lines that brought older models out of mothballs up until last month will probably face enormous operating losses this quarter as lower freight rates catch up to them. 

The only good news is that suffering carriers like SFL and FRO may finally have affordable entry points with their single-digit P/E ratios.  I'll give the market a few more weeks to take them down a bit more.  The ocean-going shipping industry won't disappear, but size has a lot to do with staying power for those carriers that will survive. 

Full disclosure:  No positions in shipping stocks at this time.  I may open long positions in SFL and/or FRO in the near future.