Marco Polo Marine (SGX: MAPM) shares are up 6% in Singapore today. There's no news release, no event, that really explains this. So we must assume that there's just been a change in general sentiment about the shipping business and Marco Polo's place in it. Or, of course, simply some subset of investors have changed their view and are buying enough to move the price. Quite what that would be which does change that view is difficult to determine - the shipping business isn't changing all that much.
Or rather, there's an aspect of shipping which is wildly cyclical which is in the ownership and chartering out of vessels. For many decades this has gone through a boom and bust scenario. Hulls take time to build, so when demand rises there's no new supply able to leap into action. This means prices take the weight of that change in demand. This does stimulate new hull building, also delays scrappage dates on old vessels. This leads to a surge of supply a few years after that rise in demand and prices slump. But now we've new hulls on the market and it takes time for the low prices to clear that excess supply off into scrappage. This is just the way that ship owning works.
Marco Polo Marine share price from SGX
The issue with Marco Polo though is rather different. They are: ”ship chartering, ship building, conversion, repair and maintenance services” which is more like the first derivative of the actual shipping market. And here there's a structural problem. Many countries think that subsidising shipbuilding is a path to national riches. They're incorrect in this of course but that doesn't seem to stop them. This means a base structural problem for those in the ship servicing business because it means lots of subsidised competition.
The only way out of this is to move upmarket. As Marco Polo has been doing, exploring ammonia as a fuel for example. Or working on servicing offshore platforms - that's a service, not a manufacture.
There is also the possibility of simply hoping. That more general market conditions will lead to a local bolus of demand. Marco Polo might indeed benefit from the booming Indonesian economy, for example.
The problem for us as investors is that there's no one clear reason for this 6% - or other - changes in the Marco Polo share price. We're having to sift through for more subtle influences to see what is happening. All we can say with strict confidence is that investors seem persuaded that prospects are looking better. Whether that will continue, well, that's a matter of opinion.
