Typhoons to Higher Freight Indexes Poses Higher Upside Potential for Thai Shipping Stocks

BDI Index inched up by 8% with AMA leading gains in shipping stocks

Typhoon Chanthu bypassed Chinese shores, reportedly did not cause any major casualties and flooding as expected. However, the world’s largest port in Shanghai remains closed maintaining caution. Two other major Chinese ports Xiamen Port in Ningbo and Zhoushan port which are prime contributor to the global supply chain network, remain closed as of Tuesday morning. Both the ports harbors China’s largest oil storage tanker and refiners. 

Zhoushan port still maintains highest level of emergency while Xiamen port reportedly reduced to the second level of emergency.  

Path of Typhoon Chanthu Source: Google Earth, Kaohoon

On the other hand, a tropical storm turned into a hurricane, Nicholas is expected to cause severe landfall in Houston, Texas. According to Accuweather, Nicholas is moving at 17km/hour. 

Path of Hurricane Nicholas bypassing Gulf of Mexico Source: Google Earth, Kaohoon

The hurricane is expected to bypass the Gulf of Mexico posing a severe threat to coastal refineries and petrochemical facilities. Global’s largest production site of natural gas in the Gulf of Mexico produces 52% of the world’s natural gas, faces another threat of prolonged closure. Production is yet to return online after it halted production since last month’s hurricane Ida. 

U.S natural gas future slipped 0.23% on the basis of further production disruption while WTI crude oil is up by 0.68%. 

The Baltic Dry Index (BDI) rose by 8% with China to North America West and East Coast freight index both up 8% as well to $20,586 and $22,173 respectively, according to Freightos.

The BDI level is at its highest since August 23, also at the level of the biggest daily percentage gain in over three months. 

BDI fell 500 points or around 17% between August 2 to September 8 and started to recover its ground afterward. The index is now on a rise with a total gain of 15% since then.

Thai shipping stocks poses upside gain potential

The share price of shipping stocks continued to rally on Tuesday. On morning session closing, the share price of Regional Container Lines Public Company Limited (RCL) gained ฿0.25 (0.43%) to ฿57.75.

Precious Shipping Public Company Limited (PSL) fell ฿0.30 (-1.28%) to ฿23.10/share.

Thoresen Thai Agencies Public Company Limited (TTA) rose ฿0.10 (0.62%) to ฿16.00.

Meanwhile, Baltic Supramax Index (BSI), a benchmark for TTA and PSL, saw its first gain in two weeks by 10 points to close at 3,180 points.

Prima Marine Public Company Limited (PRM) increased to ฿0.15 (2.29%) to ฿6.70 while V.L. Enterprise Public Company Limited (VL) dipped by ฿0.02 (0.93%) to ฿2.12. Triple I Logistics Public Company Limited (III) slipped by ฿0.10 (0.83%) to ฿12.00.

Ama Marine Public Company Limited (AMA) on the other hand, jumped by ฿0.45 (8.65%) to ฿5.65.

KTBST Securities (KTBST) is positive on the uptick of BDI and the rebound in BSI, which is a positive sentiment for shipping stocks after the index, especially BSI, was pressured primarily by Hurricane Ida on gain shipment and the coup in Guinea on aluminum shipping. 

The broker estimates that the freight rate will remain at a high level in 3Q-4Q21 due to the peak of its seasonality. KTBST chose TTA as its top pick, giving a “BUY” recommendation with a target price at ฿21.00. 

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