Ship ahoy: Bunker fuel prices dip 4.2%

Even amid depressing weakness in certain routes.

According to OCBC, for the shipping sector, according to the Shanghai Containerized Freight Index (SCFI), average rates are still up on a YoY basis despite continued weakness in the China-Europe and China-USA routes.

Here's more from OCBC:

In addition, average 4QCY12 bunker fuel prices have also fallen ~4.2%QoQ so far, a positive for operating margins.

For land transportation, with the Singapore government leaning towards more supportive measures (i.e. fare increases) for the public transport operators, we turn more optimistic over their outlook in 2013.

On a general transport context, although weakness in the macro-environment continued to weigh on the aviation and shipping-related industries, more than half of the counters in our coverage managed to outperform the FTSE Straits Times Index.

Overall, it was a much better showing versus CY2011 where our almost our entire coverage lagged behind the main index significantly.

We are turning slightly optimistic of the overall transportation sector in CY2013 due to a favorable set of preliminary indicators and fuel outlook, though much will still hinge on an improving economic situation.

Entering CY2013, we upgrade the aviation sub-sector to NEUTRAL. Barring any deterioration in the current macro-economic situation e.g. worsening of the Euro-zone crisis, we are hopeful that the combination of favourable jet fuel prices and a gradual improvement in leading indicators i.e. business confidence will lead to betterprofitability prospects for the overall airline industry.

Within the sub-sector, we prefer low-cost carriers over premium carrier, specifically Tiger Airways [BUY; FV: S$0.81] for its ability to satisfy the growing demand for air-travel in the emerging markets.

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