ATCO - Atlas Corp

[bluedevil]

1 hour ago, petec said:

Do you know of a good source to prove this? Ie showing total ship orders?

Read Greg Miller columns on TradeWinds. Liners are getting such ridiculous rates on containers right now that they are desperate to get their hands on ships. Desperate. This has lead them to sign ships that normally operate in spot market for healthy 4-5 year terms so that they can get their hands on them and enjoy bumper profits now, even if they have to give a bit back on back end. This has given a huge boost to some of Atlas’s competitors that had spot fleets to basically go from spot to contracted. I think this is why Danaos as surged in price so much. The craziness of the market has definitely benefited and made stronger some of atlas’s competitors, even more so than atlas because they had more of their fleet exposed to spot. 

[Viking]

bluedevil, thanks for the suggestion. 

 

Rise in trans-Pacific spot rates is relentless — and accelerating

New all-time highs for Freightos indexes: $9,889/FEU Asia-East Coast and $6,829/FEU Asia-West Coast

- https://www.freightwaves.com/news/rise-in-trans-pacific-spot-rates-is-relentless-and-accelerating

 

”An import decline caused by congestion would not decrease spot rates. But rates would theoretically decline if there were a decrease in demand caused by a shift in consumer spending away from goods toward services, and/or if future demand fell because it had been pulled forward.

 

Asked by American Shipper for the rationale behind the lower October forecast compared to the May estimate, NRF Vice President for Supply Chain and Customs Policy Jonathan Gold replied, “The numbers we’re seeing now are high because there has been so much pent-up demand and more vaccines mean people are finally getting out of the house to shop again. Retailers have had to import record amounts of merchandise to keep up.

 

“We expect consumer demand to remain strong, but with the ongoing supply chain disruptions and port congestion we’ve seen for months now, many retailers are moving up their holiday imports to be sure that holiday merchandise arrives in time,” said Gold. “That means the peak season that would traditionally come in October will likely come sooner this year, and much of the holiday merchandise will already be here by October.”

[Xerxes]

23 hours ago, petec said:

Do you know of a good source to prove this? Ie showing total ship orders?

 

I don't have that global view/picture. My comment was more specific to the comment that "other" leasing companies must be speculating on the spot market. Whilst that might be true, there is no evidence to suggest that the "other" leasing companies are actually placing POs with ship yards without having long-term contracts to support them, and that therefore Atlas is somehow unique.

 

That said, the divergence in the performance of Atlas stock price with peers is concerning.

 

Unrelated, this article from 2020 argues that a better investment could be the leasing companies of the boxes !

 

Container rates are on fire. How can you invest in that? | Hellenic Shipping News Worldwide

[Spekulatius]

It seems to me that there is a surge in orders for ships. I have no idea if they have long term contracts, but doubt that all of them do.

https://www.hellenicshippingnews.com/container-ships-drive-119-jump-in-total-new-orders-in-first-five-months-of-2021/

 

It takes probably a year from order placement to actually get them to operate.

Edited June 19, 2021 by Spekulatius

[petec]

8 hours ago, Spekulatius said:

It seems to me that there is a surge in orders for ships. I have no idea if they have long term contracts, but doubt that all of them do.

https://www.hellenicshippingnews.com/container-ships-drive-119-jump-in-total-new-orders-in-first-five-months-of-2021/

 

It takes probably a year from order placement to actually get them to operate.

Yes, there’s been a significant jump in orders. Mind you, that’s after a long period of very low order rates. Bing said on the q1 call that if you take trend demand growth and scrappage rates into account, new orders don’t yet suggest oversupply. But that’s something to watch. 
 

As for Atlas stock vs peers, peers will capture this boom immediately as they have greater spot exposure. Atlas will capture it in contracted sales immediately, but the cash flows from this boom take longer and will last (in some cases) for 15 years. Watch the contracted sales. 

[petec]

The other key point, of course, is that Atlas stock, with its long term contracts, never got as cheap/distressed as its spot-exposed peers.

[petec]

Sadly the monster order for 7k vessels hasn’t materialized yet. But the opportunity to roll small/old ships off spot onto 2-5 year contracts continues to increase. CONTEX is rising >2% per week at the moment and stands at 1620 today, 3x the most recent cycle high of 2018. 
 

As these ships roll onto higher, longer contracts I think they become a moderately significant source of funding for the newbuilds. 

 

EDIT: actually they may have shot their bolt a little early. I notice that in q3 their two smallest classes of ship, up to 5,100TEU, averaged 0.7 year leases. By Q4 it was 1.5 years, and by Q1 it was 2 years. This explains why, on the 1Q call, they said they didn't have much rolling off until Q4. Still, they do have ships rolling off in Q4 and in 2022, and they must be getting into negotiations on those now. It will be interesting to see if this has a noticeable impact on backlog and lease length over the next couple of quarters.

Edited June 22, 2021 by petec