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Singapore shipping sector underwater

The waters around Singapore appear to be crawling with ships, but low commodity prices continue to hurt the sector.

Vast tankers almost form a carpet between Marina Bay Sands casino and the islands on the far side of the strait. The perception is that the shipping industry is finally gaining some headway. Unfortunately, with commodity prices and global trade continuing to settle, there may be still be stormy waters ahead for maritime investors.

Rates for freight continue near their recent lows, and with increases in the global fleet capacity outstripping the growth in trade, maritime stocks look to be set for another year of bad performance.

While the problem of overcapacity may be ameliorated slightly by historically low predicted container growth for 2016, this will have a knock-on effect on shipbuilders as orders sink further.

In Singapore, the five worst performing stocks of 2015 included not one but three maritime stocks: SembCorp Marine, SembCorp Industries and Keppel, all dropping by at least 25% for the calendar year. Among the funds with Keppel in the top ten holdings are Aberdeen Singapore Equity SGD (6.1%), Deutsche Singapore Equity A SGD (4.4%) and LionGlobal Singapore Balanced SGD (2.7%), according to FE data.

The port, meanwhile, steadily leaked trans-shipment business to regional competitors like Busan and Ningbo-Zhoushan, forcing the emergency lowering of fees by the Maritime and Port Authority (MPA) in an attempt to support the industry.

Undaunted, the MPA is pushing on with its plans for a new super-port at Tuas (on the west side of the island). This vast development is due to start coming online in 2020, giving the city-state three years to turn its flagging maritime fortunes around, before the additional capacity impacts supply and demand.

The Tuas development, however, has provided brighter prospects for some, such as those investing in the companies contracted to complete the works. Daelim Industrial, the firm carrying out dredging, reclamation and wharf building at the site, saw a significant bounce in May, June and July of 2015 on the back of positive press coverage thanks to MPA.

For lower volatility, port construction stocks appear to be the better way to play the maritime sector than shipping.

Paul Seligman is with Meyado Private Wealth Management in Singapore.


Despite a brief spike in performance, the Baltic Dry Index has tanked along with the Singapore market over the trailing twelve months:


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