1、North America Equity Research23 April 2019Equity Ratings and Price TargetsMkt CapRatingPrice TargetCompanyTicker($mn)Price($)CurPrevCurEnd DatePrevEnd DateDiana ShippingDSX US313.613.14Nn/cn/cn/cGolden OceanGOGL US811.495.63OWn/c9.50Dec-1911.00n/cScorpio BulkersSALT US339.714.77Nn/c6.00Dec-197.00n/c
2、Star Bulk CarriersSBLK US719.567.95OWn/c16.00Dec-1918.00n/cNavios Maritime HoldingsNM US53.264.46UWn/cn/cn/cNavios Maritime PartnersNMM US163.140.95OWn/cn/cn/cSource:Company data,Bloomberg,J.P.Morgan estimates.n/c=no change.All prices as of 18 Apr 19.Q1/19 Dry Bulk EarningsPreviewBuy on Weakness or
3、Avoid Dry Bulk?ShippingNoah R.Parquette,CFA AC(1-212)622-Bloomberg JPMA PARQUETTE J.P.Morgan Securities LLCSee page 32 for analyst certification and important disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware tha
4、t the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.Dry bulk rates and stocks were heavily impacted by the news that Vale iron ore production would be taken offli
5、ne as a result of the dam failure in January.The question is,of course,is this a reason to avoid dry bulk or a prime buying opportunity?While we see clear risks to demand in 2019 and 2020 as a result of this development,we believe the stock weakness is a good buying opportunity for select dry bulk s
6、tocks.We are encouraged by the supply response so far,with new orders of ships staying low and signs that Capesize scrapping could increase materially.Trimming rate forecast but continue to expect an IMO 2020 driven recovery next year.Weve brought down our 2019 Capesize rate forecast to$10,500(from$
7、14,000)and 2020 Capesize rate to$19,500(from$23,000),due primarily to lower ton-mile demand growth from the Vale production cuts.However,we continue to believe a modest recovery in demand next year,combined with the beneficial supply effects from IMO 2020,could lead to a material recovery next year.
8、Supply restraint.New orders in Q1/19 were the lowest in two years,with nearly all of the orders coming in January,before the move lower in rates.On the scrapping front,March saw a spike in the Capesize scrapping rate to 4.3%,so itll be interesting to see if this level of scrapping can be sustained f
9、or a period of time.Overall,we now expect fleet supply growth of 1.6%in 2019 and 2020,and 0%in 2021.Keeping ratings unchanged,prefer scrubber installers.Our top pick remains SBLK with a new$16 Dec-19 PT(from$18),although we keep our OW ratings on NMM and GOGL.We believe SBLK remains a unique stock g
10、ivens its combination of dry bulk exposure,full scrubber installation,and NAV accretion potential.We see ample liquidity to manage a period of rate weakness,and view the strategy of share repurchases(at discounts to NAV)as the way to generate shareholder value at this point in the dry bulk cycle.Tab
11、le 1:Select rate forecasts$per vessel/day201920202021Cape$10,553$19,500$17,750 (3,447)(3,500)(1,250)Pana$9,420$13,750$13,000 (2,080)(5,250)(4,000)Source:J.P.Morgan estimates.Figure 1:Q1/19 stock performance%changeSource:Bloomberg.-40.0%-30.0%-20.0%-10.0%0.0%10.0%20.0%2North America Equity Research23
12、 April 2019Noah R.Parquette,CFA(1-212)622-Dry Bulk Industry UpdateBrazil iron ore shipmentsObviously,the focus in the dry bulk market in recent months has been the iron ore production suspensions from Vale.See Figure 2 below for actual seaborne shipments of iron ore from Brazil and China.As can be s
13、een,material impacts to Brazilian cargoes have only started to take effect in the past couple weeks.Compounding this decrease has been effects on Australian shipments due to the cyclone in late March.However,Vale recently announced that it will restart the Brucutu mine(30 Mtpa).Pro forma for the Bru
14、tutu announcement,JPM research expects 2019 iron ore shipments to be 320 Mtpa(vs.Vale guidance of 307-332 Mtpa).See this report for the latest forecasts.Figure 2:Brazilian iron ore shipments(left)and Australian iron ore shipments(right)million tonsSource:J.P.Morgan estimates,Bloomberg.Iron ore outlo
15、okIron ore imports into China were 261 MT in Q1/19,unchanged from Q4/18,but down from 270 MT in Q1/18.Despite the production cuts from Vale,Brazil remained an important source.Brazil was actually 27%of total imports in February,a record high in terms of market share.However,we would expect shipments
16、 to fall in Q2 as the production cuts flow through to shipments.In terms of port stockpiles,the drawdown in stocks seen for most of H2/18 seems to have come to an end,at least for the time being.There were some encouraging signs in the Chinese steel market in Q1.Steel production was 230 MT during th
17、e quarter,down from 236 MT in Q4 but up from 211 MT in Q1/18.Steel mill profitability has also stabilized and begun to creep higher(see Figure 3).See this report for the latest JPM outlook on iron ore.-5.0 10.0 15.0 20.0 25.0-2.0 4.0 6.0 8.0 10.0 12.0 14.03North America Equity Research23 April 2019N
18、oah R.Parquette,CFA(1-212)622-Figure 3:Chinese iron ore imports(left)and iron ore port stockpiles(right)billions ton-miles and,000 tonsSource:J.P.Morgan estimates,Bloomberg.Figure 4:Chinese steel production+demand(left)and steel mill profitability(right)million tons and CNYSource:J.P.Morgan estimate
19、s,Bloomberg.Coal outlookCoal imports into China were 75 MT in Q1/19,upfrom 53 MT in Q4/18 and 75 MT in Q1/18.There was a rebound in coal imports after the import bans in Q4.Figure 5:Chinese coal imports(left)and port stockpiles of coal(right)millions tons and billion ton-milesSource:J.P.Morgan estim
20、ates,Bloomberg.-4%-2%0%2%4%6%8%10%12%14%4,600 4,800 5,000 5,200 5,400 5,600 5,800 6,000 6,200Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19LTM Ton-MilesLTM YoY6,0008,00010,00012,00014,00016,00018,000Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct
21、-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Chinese Iron Ore Port Stockpiles(,000 tons)-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%700.0750.0800.0850.0900.0950.01,000.0Jan-15May-15Sep-15Jan-16May-16Sep-16Jan-17May-17Sep-17Jan-18May-18Sep-18Jan-19ProductionGrowth(YoY)Demand Growth(
22、YoY)05001,0001,5002,0002,500(3,000)(2,000)(1,000)01,0002,0003,0004,0005,000Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Apr-19SteelIron OreCoking CoalProfitability0.05.010.015.020.025.030.035.040.0China Thermal Coal ImportsChina Coking Coal Im
23、ports1,0001,5002,0002,5003,0003,5004,000Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Chinese Thermal Coal Port Stockpiles(,000 tons)4North America Equity Research23 April 2019Noah R.Parquette,CFA(1-212)622-Soybean outlookSoybean imports into China were 16
24、.7 MT in Q1/19,down from 18.0 MT in Q4/18 and 19.6 MT in Q1/18.While some U.S.cargoes have appeared,they are still a fraction of what they were this time last year,and other sources are not adequate to compensate for the lost cargoes.We would expect a resolution to the trade dispute could provide a
25、nice boost to mid-size dry bulk demand if the soybean trade resumed as usual.Figure 6:Chinese soybean(left)and bauxite(right)importsbllion ton-milesSource:J.P.Morgan estimates,Bloomberg,Clarkson Research Services.New ordersNew orders during Q1/19 were 3.9 million dwt,with 3.1 million dwt of those or
26、ders done in January.Q1/19 had the lowest level of orders in two years.The notable order was for 10,85,000 DWT Panamaxes ordered at Shanhaiguan SB by AVIC Leasing(2021/2022 delivery).The orderbook is now 11.1%of the fleet,down modestly from 11.9%in April 2018.Newbuild prices held steady despite the
27、rate weakness,with a Capesize now at$51.0million(up from$44 at the end of 2017)and a Panamax at$27.5 million(up from$25 million).While newbuild prices have stayed firm,secondhand values modestly weakened(primarily Capesizes)which has brought the 5-year secondhand/newbuild ratio down to 71.5%(from a
28、cycle peak of 77%in March 2018).We expect that metric to mean that new orders wont get out of hand in the near term.In terms of delivery dates,recent new orders indicate 2021 deliveries are where shipyards are at now(see Table 2 below),giving us comfort for fleet growth through the end of 2020.-15%-
29、10%-5%0%5%10%15%20%25%600 650 700 750 800 850 900 950 1,000 1,050 1,100Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19LTM Soybean Ton-MilesLTM YoY-60%-40%-20%0%20%40%60%80%100%-100 200 300 400 500 600 700Jan-15Apr-15Jul-15Oct-15Jan-16Apr-16Jul-1
30、6Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19LTM Bauxite Ton-MilesLTM YoY5North America Equity Research23 April 2019Noah R.Parquette,CFA(1-212)622-Table 2:Top dry bulk shipyards and delivery date of recent ordersmillion DWTDeliveryRankYardLocationDWT%of TotalRecent orders1Shanghai Wa
31、igaoqiaoChina8.6 9.2%20212New Times SBChina7.0 7.5%20213Oshima ShipbuildingJapan6.4 6.9%20214Beihai ShipyardChina4.4 4.7%20215Yangzi Xinfu SBChina4.0 4.3%20216Hyundai HI(Ulsan)Korea3.7 3.9%20217Hyundai Samho HIKorea3.3 3.5%Late 20208Jiangsu New YZJChina3.0 3.2%Late 20209Imabari SB HiroshimaJapan2.9
32、3.1%Mid 202010Imabari SB SaijoJapan2.4 2.6%Mid 2020Remainder47.4 51.0%TotalJapan93.0 100.0%Source:Clarkson Research Services.J.P.Morgan estimates.Figure 7:Newbuild orders and secondhand/newbuild price ratio(5-year)on left/Secondhand vessels traded on rightmillion dwtSource:Clarkson Research Services
33、.Figure 8:Secondhand Capesize(5-years old)valuation gap$in millionsSource:J.P.Morgan estimates,Clarkson Research Services.-500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,0002001 2003 2005 2007 2009 2011 2013 2015 2017 2019CapesizePanamaxHandymaxHandysize50.0%55.0
34、%60.0%65.0%70.0%75.0%80.0%0.02.04.06.08.010.012.0Jan-16Apr-16Jul-16Oct-16Jan-17Apr-17Jul-17Oct-17Jan-18Apr-18Jul-18Oct-18Jan-19Newbuild Contracts(DWT)Secondhand/Newbuild Ratio(8.0)(6.0)(4.0)(2.0)0.02.04.06.08.010.001020304050607020092010201120122013201420152016201720182019Valuation Gap-(trailing 4mo
35、)5-Year Actual5-Year Hypothetical6North America Equity Research23 April 2019Noah R.Parquette,CFA(1-212)622-Scrapping minimalScrapping has begun to increase in the Capesize segment after a very low level in 2018.Overall,dry bulk scrapping averaged a 1.2%annualized level in Q1/19,with Capesizes at 2.5
36、%.However,March saw a Capesize scrapping rate of 4.3%,so itll be interesting to see if this level of scrapping can be sustained for a period of time.We expect scrapping to increase in 2019 due to weaker freight rates and we see some potential for scrapping to increase after the ballast water treatme
37、nt regulations in September 2019 and the IMO Sulphur regulations in 2020.About 6%of the fleet is 15 years old.Figure 9:Dry bulk scrappingannualized rateSource:J.P.Morgan estimates,Clarkson Research Services.Figure 10:Dry bulk fleet age profile%of fleetSource:J.P.Morgan estimates,Clarkson Research Se
38、rvices.Supply/demand balanceWe are making several changes to our supply/demand model:Lowering 2019 iron ore ton-mile demand growth to-1.3%(from 2.6%)driven by 0%volume growth(vs.2.0%previously)and 5,475 nm(from 5,600 nm)Lowering remainder of dry bulk ton-mile growth in 2019 to-0.6%(from 1.5%)Increas
39、ing Capesize scrap rate for 2019 to 3.5%(from 2.0%)0.0%0.5%1.0%1.5%2.0%2.5%3.0%3.5%4.0%4.5%2015201620172018JanuaryFebruaryMarch2019 avg=1.2%0%10%20%30%40%50%60%70%80%90%100%0%2%4%6%8%10%12%14%0123456789101112131415161718192021222324252627282930+%of Total Fleet By Age(DWT)Cumulative7North America Equ
40、ity Research23 April 2019Noah R.Parquette,CFA(1-212)622-Keeping fleet slowdown assumption starting in 2020 due to IMO Sulphur regulations.Removing additional order assumptions for 2020(just using the existing orderbook to model supply growth)Based on our forecasts(Tables 3 and 4 below)we expect 2019
41、 to be a relatively weak year,with rates below 2018.We continue to look for a jump higher in rates in 2020 as the IMO Sulphur regulations cause the fleet to slow down as a result of the higher fuel costs.Given the lack of newbuild orders,we remain confident in our near-term forecasts,although a reco
42、very is still vulnerable to shifts in scrapping levels,new orders,deterioration in demand,or a material increase in vessel speed.Figure 11:Dry bulk fleet supply growth expectations gross/net Capesize(left)vs.rest of dry bulk(right)%y-o-y growthSource:J.P.Morgan estimates,Clarkson Research Services.F
43、igure 12:Dry bulk fleet supply/demand balance Capesize(left)vs.Panamax(right)utilization and$per vessel/daySource:J.P.Morgan estimates,Clarkson Research Services.“Utilization”is calculated as ton-mile demand divided by ton-mile supply(fleet dwt*24*365*speed*congestion factor)as a percentage of a hyp
44、othetical full vessel employment(42%for Capesize and 59%for the smaller ships).-2.0%-1.0%0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%20132014 2015 2016201720182019 202020212022-2.0%0.0%2.0%4.0%6.0%8.0%10.0%12.0%2013 2014 2015 2016 2017 2018 2019 2020 2021 2022010,00020,00030,00040,00050,00060,00060%65%7
45、0%75%80%85%90%95%100%19992002200520082011201420172020UtilizationPanamax020,00040,00060,00080,000100,000120,00060%65%70%75%80%85%90%95%100%105%19992002200520082011201420172020UtilizationCapesize rate8North America Equity Research23 April 2019Noah R.Parquette,CFA(1-212)622-Table 3:Dry bulk supply/dema
46、nd model Capesizemillion tons,billion ton-miles,nautical miles,knots,million dwt,and$per vessel/daySource:J.P.Morgan estimates,Clarkson Research Services,Bloomberg.Note:Assumptions in blue.Fleet supply forecast assumes existing orderbook with 10%cancellation rate and 30%slippage rate(push back to fo
47、llowing year),as well as 2.5 million dwt of new orders for 2020,7.5 million dwt of new orders for 2021 delivery,and 15 million dwt of new orders for 2022 delivery.Rate forecast based on a historical best fit line using Effective Utilization as the independent variable.DemandSupplyIron Ore%AvgTon-Mil
48、e%FleetCongestionTon-mileTM demand/NormalEffectiveCapesizeYearTonsGrowthDistance DemandGrowthBeginDeliveriesScrappingEndAverageSpeed/OtherSupplyTM supplyLadenUtilizationRate19993990.0%5,477 2,1840.0%78.34.3(2.4)79.378.311.013.0%6,56833.3%42.0%79.2%12,480200044712.1%5,446 2,43311.4%81.25.1(1.0)83.181
49、.211.013.0%6,80835.7%42.0%85.1%24,28020014490.6%5,612 2,5213.6%85.05.5(1.5)86.985.011.010.0%7,37434.2%42.0%81.4%15,37420024776.2%5,600 2,6726.0%88.03.5(1.3)89.188.011.06.0%7,97233.5%42.0%79.8%13,32320035127.4%5,586 2,8627.1%91.35.1(0.8)93.591.311.014.0%7,56537.8%42.0%90.1%41,135200458915.0%5,577 3,2
50、8514.8%97.97.40.0102.497.911.012.5%8,25639.8%42.0%94.7%70,196200566012.0%5,615 3,70412.7%106.98.8(0.2)111.4106.911.39.0%9,58338.6%42.0%92.0%51,45120067097.5%5,730 4,0619.6%116.210.4(0.3)121.0116.211.59.0%10,64938.1%42.0%90.8%44,73220077739.0%5,826 4,50110.8%126.310.70.0131.6126.311.010.5%10,89241.3%
