Gf Securities released a research report stating that the dry bulk shipping market is at the starting point of a new cycle, with the supply side showing bottoming characteristics. On the demand side, the global manufacturing PMI is expected to return above the 50 boom-bust line by early 2026, combined with potential fiscal expansion and interest rate cut expectations, which are likely to lead to a recovery in demand for bulk commodities. Furthermore, with the Simandou project continuing to ramp up production, large vessels may be the first to enter a prosperous cycle. Although the stock price trends of bulk shipowners listed in Hong Kong and the US are highly correlated, the profit elasticity varies significantly across different vessel types. The report suggests selecting Hong Kong and US-listed dry bulk shipping companies based on two dimensions: Time Charter Equivalent (TCE) elasticity and balance sheet quality. The main views of Gf Securities are as follows:
Cycle Position: Supply Bottom Gradually Forming, Structural Bull Market Approaching The dry bulk shipping market is at the beginning of a new cycle. The supply side exhibits bottoming features: the global orderbook as a percentage of the fleet is at a historical low. Furthermore, due to shipyard capacity being occupied by higher-value-added container ships, LNG carriers, and tankers, new dry bulk vessel deliveries are expected to decline in 2026-2027. Simultaneously, signals of demand recovery are emerging: the global manufacturing PMI is projected to move above 50 by early 2026, and with potential fiscal expansion and interest rate cut expectations, demand for major bulk commodities is anticipated to rebound. Coupled with increasing volumes from the Simandou project, large vessels might lead the way into an upturn.
Vessel Structure Determines Earnings Elasticity Despite high correlation in stock prices among Hong Kong and US-listed bulk owners, profit elasticity differs greatly by vessel type. Quantitative analysis shows that for every 100-point increase in the Baltic Dry Index (BDI): Capesize vessels exhibit the highest elasticity, with TCE increasing by approximately $1,274 per day. The elasticity of medium and small-sized vessels is relatively lower, with TCE increases concentrated around $800 per day. Therefore, during an industry upcycle, owners with a high proportion of large vessels will have stronger profit potential, while companies focused on small and medium-sized vessels emphasize operational stability and defensiveness.
Through a comparative study of listed dry bulk companies in Hong Kong and the US, based on TCE elasticity and balance sheet quality: Star Bulk Carriers (SBLK.US), with its multi-vessel type configuration, essentially positions itself as a vehicle for industry beta. Leveraging extensive operational experience and economies of scale, it maintains daily costs at a relatively low industry level, building a deep competitive moat. Its profits are somewhat protected during downturns, while it exhibits earnings elasticity in line with market trends during upturns.
Himalaya Shipping (HSHP.US), with its 100% Newcastlemax fleet equipped with 100% scrubbers/LNG readiness, maintains a market premium typically around 40% or higher. This represents the stock with the highest operating leverage and the youngest fleet age (2 years) in the US market. If a significant BDI upcycle is anticipated, HSHP is a primary target for high elasticity.
Genco Shipping & Trading (GNK.US), Safe Bulkers (SB.US), and Pacific Basin Shipping (02423) all maintain relatively low leverage. Their vessel configurations are either balanced or skewed towards smaller vessels, providing strong defensiveness during significant market downturns. These companies are worth focusing on for investors seeking lower volatility.
Risk warnings include a global macroeconomic recovery falling short of expectations, an unexpected surge in supply-side capacity, the disappearance of the "longer voyage" benefit due to eased geopolitical tensions, a sharp rise in fuel costs, environmental policy risks, significant volatility in the BDI, and valuation trap risks.