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Business News/ Markets / Stock Markets/  Red Sea Crisis leads shipping rates to spike; Should you Buy, Sell or Hold the shipping stocks?

Red Sea Crisis leads shipping rates to spike; Should you Buy, Sell or Hold the shipping stocks?

Stock Market Today: Shipping Corporation, Great Eastern Shipping, others have seen share prices rise 65-200% in a year. While outlook has improved regularly post Covid led disruption, global slowdown is impacting demand now. As Red Sea crisis spikes freight rates should you Buy, Sell or Hold stocks?

Red Sea Crisis: Shipping rates spike (Photographer: Qilai Shen/Bloomberg)Premium
Red Sea Crisis: Shipping rates spike (Photographer: Qilai Shen/Bloomberg)

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. So while Red Sea route is seeing some impact, rest of shipping routes are normal. Overall demand scenario still needs to improve for significant upside in prospects of shipping companies.  

Also Read- NALCO share price rises 8% post Q3 results: Should you Buy, Sell or Hold ?

Crisil Research in its outlook report on shipping industry had said that , while on year -on-year basis the charter rates for crude and product tankers may have softened this fiscal from the average of ~$50,000 per day in the last fiscal, as global uncertainties (caused by Covid-19 followed by geopolitical conflicts) eased. Expecting the current trend in global trade continues, charter rates could further moderate next fiscal year, but will remain higher than the pre-pandemic level, supported by buoyant tonne-mile2 demand and limited new fleet deliveries.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions




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Ujjval Jauhari
Ujjval Jauhari is a deputy editor at Mint, with over a decade of experience in newspapers and digital news platforms. He is skilled in storytelling, reporting, analysing and writing about stocks, investment ideas, markets, corporates and more. He is based in New Delhi.
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Published: 14 Feb 2024, 04:29 PM IST
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