Stock: GNK
Rating: Buy
Author: Waleed M. Tariq
Bullish
- Global economic recovery and commodity trade have boosted shipping, with operators generating a handsome profit.
- Genco is well-positioned to grasp prospects given its recent restructuring.
- Genco is enhancing its fleet, decreasing debt, and strengthening management to gain a competitive edge.
Bearish
- The volatile global seaborne transport business can lead to a pessimistic trend.
Dry-bulk capacity
- The dry-bulk shipping market has 2,300 individual carriers.
- In 2021, new ship deliveries fell 22% yoy. 308 25,000-68,000 dwt units are scheduled for delivery in 2022-2024, a 34% decline from 2019-2021.
- Most shipyard slots are booked until 2025, blocking off fresh bulker orders.
Dry-bulk shipping demand
- Global trade in dry-bulk goods has expanded. In 2020, world steel production will be 1065 million tons, up from 129 million in 2010.
- In 2021, dry-bulk ships loaded 1 billion tons of coal, up from 1.195 b in 2020.
Freight Rates
- Genco’s average TCE rates rose by 138.7% from $10,221 per day for the year ended December 31, 2020 to $24,402 per day for the year ended December 31, 2021, the highest annual TCE since 2010.
- TCE rates for Q4 2021 were $35,200 per day, compared to $13,167 for Q4 2020. Freight and charter charges fluctuate seasonally.
- Although freight prices have fallen from Q4 2021 highs, the profits situation has remained robust due to historically profitable freight rates.
Conclusion
- Genco is well-positioned for dry-bulk market growth. Most second-quarter 2022 ship-days are scheduled at over $27,500 each day, sealing in profits and cash flows.