With day rates and asset values expected to rebound in 2011, FBR sees containership improving going forward, although in the near term companies like Seaspan (NYSE:SSW), Danaos (NYSE:DAC) and Costamare (Nasdaq:CMRE) will have limited upside to earnings until day rates improve.
FBR said, "We believe the containership market is poised for another improved year in 2011 as world trade resumes at a nearly 10% growth rate, ahead of expected new supply growth of 8%. The laid-up capacity (more than 10% at the peak) has almost entirely been reabsorbed by the market. Slow-steaming to save on fuel costs should continue to create incremental demand for vessels and reduce vessel efficiency. Increased box production should also help containerized trade reach new record levels again in 2011 and 2012. While some are concerned about potentially less-robust trade from the Chinese economy impacting the Transpacific route, surprisingly strong Latin American demand should help offset any weakness on North-South routes. We expect liners, owners, and investors to bid up charter rates and asset prices in anticipation of a potentially undersupplied environment in late 2012 or 2013.
"Containership companies. Seaspan, Danaos, and Costamare all have multiyear charters and limited near-term upside to earnings from recovering day rates. Euroseas (roughly half dry bulk and half containerships) has several containership vessels that should reprice in 2011 from levels that are below market and in some cases below operating costs."
Seaspan was trading at $12.93, up $0.51, or 4.11 percent, as of 11:49 AM EST. Danaos was at $3.76, up $0.02, or 0.53 percent. Costmare Inc. was trading at $14.65, up 0.19, or 1.31 percent.
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