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Throughout October and November - a period of time when container shipping was smashing records while crude tankers suffered - Splash readers were invited to vote for which shipping sectors would perform best and worst in 2021. With more than 1,000 votes cast, our readers have, by and large, stuck with the status quo, believing current market dynamics will play out over the coming 12 months with containers remaining the best performers and crude tankers’ tough times continuing. Armed with our readers’ thoughts we approached many of the world’s leading shipping analysts this month to put them on the spot, asking them for their best and worst sector picks for next year. While not every analyst was willing to put his or her neck on the block, many did reply. Overwhelmingly analysts are bearish - like our readers - on prospects for crude tankers next year, but there’s a very mixed opinion when it comes to selecting next year’s post-pandemic winners. Looking ahead to 2021, the shipping industry has a much better view than looking in the rearview mirror at 2020 The good news What is clear from our analyst survey is that the shipping market fundamentals in general are in a far more hopeful position today than for the majority of this year - thanks to vaccines being rolled out around the world and the stunningly low global orderbook. “I generally think 2021 could be a year of great opportunity for shipping investors,” argues Joakim Hannisdahl, the head of research at Oslo-based Cleaves Securities. “Looking ahead to 2021, the shipping industry has a much better view than looking in the rearview mirror at 2020. The supply picture is getting better and better, with most orderbook-to-fleet ratios at 20-year lows while the average fleet ages continue to creep higher,” says Randy Giveans, senior vice president at Jefferies. On the demand side, he says it is hard to think of a scenario where commodity demand in 2021 is worse than this past year, so Jefferies is predicting demand growth easily outpacing supply growth. The Jefferies team is picking containerships, tankers, and LNG carriers as best performers in 2021, without specifying its worst picks. The favourable tankers pick goes against the grain of most other people surveyed. Giveans explains his rationale for selecting this currently hard-pressed sector. “Scrapping will likely increase, and now that inventory levels have been drawn down materially and refinery utilisation is on the rise, we expect a robust recovery in demand for crude and diesel/gasoline/jet fuel,” he tells Splash Extra. Jonathan Chappell, a shipping analyst with Evercore ISI, coins a football cliché in outlining how he sees 2021 panning out, suggesting it will be a game of two halves with tankers especially told to brace for a very tough first two quarters before the world can enjoy “some semblance of post-vaccine rollout normalcy”. J Mintzmyer, lead researcher at Value Investor's Edge, is most interested in containership stocks into 2021, primarily because the current rate surge is bringing on one- to two-year or longer charter deals and counterparty risk has greatly abated, yet the stocks still haven't surged yet. Conversely, Mintzmyer is the most sceptical of the LNG sector prospects as the orderbook is massive, export projects have been delayed, and the sector has not seen the level of demolition required on older tonnage yet. Heading in the other direction is Peter Sand, BIMCO’s chief shipping analyst. For him, LNG could be the one of the best performing sectors in 2021, at least in terms of LNG exports from the US, which have made a stellar comeback in October and November after pandemic-linked drops in volumes earlier in the year. Supporting Mintzmyer’s box pitch is Dr Adam Kent, the managing director at UK-based Maritime Strategies International (MSI). “Perhaps the most spectacular and at first glance counterintuitive, given the headline macroeconomic backdrop, has been the levels to which the containership charter market has been able to reach in Q4 2020,” Kent says, going on to predict that the sector will continue to do well into 2021 at a time when supply chains and liner company networks are stretched to their limits, buoyed by strong demand and container box repositioning. Kent suggests that by mid-year the current factors heightening today's markets will begin to unwind, but demand growth will remain healthy. “With limited fleet growth across the feeder classes the short to medium term prospects for the container charter market look better now than they have done in a while,” Kent tells Splash Extra. Dry bulk bulls Many respected names in shipping research are adamant that after many flat years 2021 is finally dry bulk’s moment in the sun. “Dry bulk is my top pick at the moment given the lowest orderbook versus fleet on record, which leads to net fleet supply growth of only 1-2% per annum,” says Hannisdahl from Cleaves. With no signs of newbuild ordering picking up, this low fleet growth could continue well into the middle of this decade, he argues, adding that Cleaves is expecting a strong rebound in demand in 2021, with Chinese consumption of rising iron ore exports from Brazil and Australia a major driver. Burak Cetinok, head of research at Arrow, also believes the dry bulk sector will outperform tankers and containers next year. “China shows continued strength and now the rest of the world is catching up,” Cetinok says. Arrow is not expecting China’s imports to grow as rapidly as they did in 2020 but they should remain elevated nevertheless. Ongoing infrastructure projects and strong recovery in manufacturing and the auto industry will keep demand at healthy levels. Elsewhere, the recovery in the industrial sector is gaining momentum and Arrow expects it to continue in 2021. Release of pent-up demand, coupled with a need to replenish stocks should see imports into the countries other than China rebound in 2021. The recent escalation in trade tensions between China and Australia is also causing coal trade patterns to shift, and Arrow believes this will be mildly net tonne-mile positive. Derek Langston, head of research at SSY, says the dry bulk market could take off if a number of developments align, such as continued strong import demand from China involving fronthaul corn, iron ore and soyabean trades, and the rest of the world joins in the recovery once the pandemic is brought under control. Rebecca Galanopoulos Jones, Alibra’s head of research, is hopeful of a dry bulk run from the second quarter next year led by a strengthening Chinese economy. She points to recent predictions from the International Monetary Fund (IMF) as a hopeful sign. The IMF is predicting that Chinese GDP will rebound in 2021 and will grow by 8.2% after falling to 1.85% this year following the Covid-19 outbreak. The impossible art Of course, analysts put themselves in the firing line by making annual sectoral selections. Splash Extra is very grateful for the many researchers who took the time to make their picks, but as has been proven year in, year out, nailing the winning horse in shipping is near impossible. Who could have predicted during lockdown one in April, for instance, the stunning profits the liner industry would be making by year-end? Many wise heads decided to avoid the spotlight when Splash Extra came calling, knowing all too well the difficulties in making short term calls. “It’s bad enough to be asked to predict the unpredictable, but to be expected to justify it too is too much. Anyone who can do this should be working for Donald Trump’s re-election campaign,” was the response of Dr Martin Stopford, Clarkson Research’s president, when contacted earlier this month.

Which sectors will fare best and worst next year?

First we asked our readers, then a host of the world’s top shipping analysts. The runners and riders are identified below

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