Shipping ETF: Staying Afloat Despite Pressures
January 11th 2010 at 3:00pm by Tom Lydon
The outlook for the shipping sector is looking bullish for the near-term, but is it enough to make up for losses sustained during the sector’s slowdown? While the sector is still smarting, analysts are expressing optimism about the prospects for its exchange traded fund (ETF).
Shipping shares have really cheap valuations right now, and the Claymore/Delta Global Shipping (NYSEArca: SEA) holds a number of these companies, reports Thomas Macleod for Seeking Alpha. Could it spell “buying opportunity”? Perhaps, but the sector still faces a few challenges:
- While analysts note that there’s still a lot of excess capacity in shipping, MacLeod points out that this capacity could diminish a lot faster than anyone’s expecting, citing low scrap steel prices. When prices are at this point, he says, ships tend to be “laid up” instead of “scrapped,” giving the illusion of more capacity than there actually is. [Why some ports are celebrating.]
- Thomas Cullen for Transport Intelligence reports that despite recovering global freight volumes, the container shipping industry appears weighed down. There is a strong possibility that a current increase in shipping activity out of regions such as Asia Pacific is a response to restocking. If so, he says, demand is likely to level out as this year continues. [Why it is important to keep tabs on the shipping industry.]
- Piracy, particularly near Somalia, and emissions controls are two major issues the industry must contend with in the coming years, putting a financial squeeze on some of the major companies, says Carbon Positive.
Meanwhile, shipping tonnage saw growth in 2009 in Singapore, as the Maritime sector appears to be growing. Wong Siew Ying for Channelnewsasia reports that the country’s maritime sector recorded a 10.1% growth in shipping tonnage in 2009. Vessel arrivals in terms of shipping tonnage reached 1.78 billion gross tonnes last year, with container ships a top contributor.
For more stories about shipping, visit our shipping category.
- Claymore/Delta Global Shipping (NYSEArca: SEA)
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.