ATCO - Atlas Corp

[Castanza]

https://www.bloomberg.com/news/audio/2021-01-17/why-the-cost-of-shipping-goods-from-china-is-soaring-podcast

Interesting discussion. I’m not sure I agree on the long term outlook but the points about competitive dynamics and the issues with really big ships are valid in my view.

Great discussion, thanks for posting

[Viking]

https://www.bloomberg.com/news/audio/2021-01-17/why-the-cost-of-shipping-goods-from-china-is-soaring-podcast

Interesting discussion. I’m not sure I agree on the long term outlook but the points about competitive dynamics and the issues with really big ships are valid in my view.

Great discussion, thanks for posting

- 85% of shipping is controlled by three ‘alliances’. Hello oligopoly
- it will be very interesting to see how the current pricing environment affects Seaspan.
- the small amount of their business that is not on long term contract should be doing well given the spike in pricing
- as contracts roll off, if spot pricing remains elevated, it makes sense new contract prices should tick higher
- will much higher spot prices make acquisitions of new vessels more difficult? This could slow growth at Seaspan.
- Seaspan looks to be in the sweet spot size wise (10 - 12,000 TEU vessels).

[no_free_lunch]

If they are stymied from growth they should have other options.  They are running an ffo yield of over 20%.   Couldn't they simply crank the dividend or cannibalize the shares if needed?   Just a question of whether management would be willing to do such. Sokol is good but is he an empire builder or will he stay focused on shareholder returns?

[petec]

I feel fairly confident on that front. Just paying down debt and using the hard market to extent contracts would move the stock, I think.

[Castanza]

https://www.bloomberg.com/news/audio/2021-01-17/why-the-cost-of-shipping-goods-from-china-is-soaring-podcast

Interesting discussion. I’m not sure I agree on the long term outlook but the points about competitive dynamics and the issues with really big ships are valid in my view.

Great discussion, thanks for posting

- 85% of shipping is controlled by three ‘alliances’. Hello oligopoly
- it will be very interesting to see how the current pricing environment affects Seaspan.
- the small amount of their business that is not on long term contract should be doing well given the spike in pricing
- as contracts roll off, if spot pricing remains elevated, it makes sense new contract prices should tick higher
- will much higher spot prices make acquisitions of new vessels more difficult? This could slow growth at Seaspan.
- Seaspan looks to be in the sweet spot size wise (10 - 12,000 TEU vessels).

What’s interesting about the shipping industry compared to others is how well you need to predict future demand. For example he was talking about how these shipping companies aren’t building bigger ships to account for the increased demand. Why? Because they recognize it’s likely not permanent. Ships are expensive and take a very long time to build. So you’ve really got to gauge that cash flow appropriately. It’s not like UPS where you can go rent a bunch of U-hauls for the busy season and call it a day.

I guess this makes sense why he though the industry might be moving back towards mid sized ships. Large ones are less flexible functionally, efficiently and operationally which carries more negatives than positives.

At least, that is what I gathered from his discussion.

[bluedevil]

I believe this is precisely why ATCO under Chen/Sokol has focused like a laser beam on mid-size ships.  I can't actually recall them purchasing a ship that was outside the mid-size category in recent years.  It has the best shot of having good use for years to come.  Since December 2019, Atlas has acquired 19 ships (including the recent newbuilds).  All I believe have been in the 10-14k category. 

[petec]

I believe this is precisely why ATCO under Chen/Sokol has focused like a laser beam on mid-size ships.  I can't actually recall them purchasing a ship that was outside the mid-size category in recent years.  It has the best shot of having good use for years to come.  Since December 2019, Atlas has acquired 19 ships (including the recent newbuilds).  All I believe have been in the 10-14k category.

Good point!

[Xerxes]

i'll check the podcast.

Another point about shipping. dont know if it was mentioned in the podcast or anywhere here.

The price of steel is a big variable as well. After 2008-09 collapse of commodity cycle, steel was crushed for years and years due to overcapacity both in China for the mills as well as over production of iron ore from the big three.

The way it plays a role has to do with the "salvage value" of old ships. The lower is the price of steel, less interested are the ship owners to capture its break-up value, so that over capacity lingers for years and years in the shipping industry. The higher steel prices go, there is a big incentive for the owners to break up their old ships. Price steel naturally is somewhat correlated with GDP, therefore, there is a feedback loop that tends to provide incentive remove old ships exactly as the economy is about to pick up and inversely, the overcapacity lingers exactly when you don't need it.