Red Sea Crisis led shipping rate spikes; should you Buy, Sell or Hold the shipping stocks?
Shipping Corporation of India share price while has gained around 85% in last one year, Great Eastern shipping company share too has gained almost 65% during the period. Essar Shipping however has seen its stock prices grow three folds. The overall outlook has improved for shipping companies regularly post Covid followed by geographical uncertainties.
Nevertheless the rising interest rates in last one year and global slowdown has also meant that demand outlook and in turn the outlook for shipping rates remain subdued. There is some spike seen in freight rates freight rates seen recently due to the Red Sea Crisis following Houthis attacks, nevertheless overall demand scenario globally needs to improve significantly for further improvement in performance and earnings of shipping companies said analysts. Also read- NBCC stock snaps a 7-day losing streak, locked in 5% upper circuit after PAT grows 59% YoY in Q3 AK Prabhakar, Head of Research at IDBI capital said that the demand outlook has to improve for sustained improvement in performance of shipping companies.
On Red Sea crisis, Prabhakar said that the resolution to the same will be sought soon. Baltic Dry index that had seen some spike also has cooled down. Baltic Dry index that remains a indicator of earning prospects of shipping industry though had seen a spike during the month of December, nevertheless has cooled down thereafter .
Thus it is not giving much indication of any overall rise in demand and freight rates. An analyst at a domestic broking said that Baltic Freight Index is a weighted average based on 11 international ship routes and three commodities - coal, iron ore and grain. It reflects on the freight and charter rates of commodities on the said routes.
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