Will shipping stocks continue to rise? The latest data reveals the truth about the industry

From Peak to Weak Rebound: What’s Going on with Shipping Stocks?

The story of shipping stocks is like a roller coaster. In mid-2022, global shipping giants led by Maersk reached a historic high—quarterly profits once soared to $8.879 billion. But reality was cruel; by Q2 2023, this figure plummeted to $1.453 billion, a decline of 83%.

You read that right. Maersk’s market capitalization peaked in early 2022 and has since fallen by 60%. The same grim picture applies to German shipping giant Hapag-Lloyd, whose market cap has also retreated by nearly 70% since the end of 2022.

Why Are Shipping Stocks the “Cutting Leeks” Representative?

Simply put, shipping stocks are a barometer of macroeconomic conditions. When global trade is active and the economy is growing, these companies transport more goods and profits rise. But once recession hits and trade cools, they immediately fall into trouble.

In the post-COVID era, the Federal Reserve aggressively raised interest rates, pushing the federal funds rate to 5.50%. This not only suppressed the US economy but also dragged down global economic growth. The result? International trade activity contracted sharply, and global shipping demand plummeted.

Maersk’s quarterly revenue vividly reflects this: from a peak of $22.767 billion in 2022 to less than $13 billion in Q2 2023, a drop of over 43%.

Will Shipping Stocks Rise Again? The Key Factors

Lower interest rates are the biggest positive. As US inflation gradually normalizes, the Fed will inevitably start cutting rates. Once the global economy recovers, shipping demand will rebound. This will be a direct stimulus for shipping stocks.

But geopolitical risks cannot be ignored. Tensions in US-China trade, accelerated de-Sinicization of supply chains in the West—these are major blows to shipping companies relying on Far East-Americas/Europe routes. Taiwanese local shipping firms like Evergreen (2603) and Yang Ming (2609), with highly concentrated routes in these regions, face limited growth potential. In contrast, Maersk and Hapag-Lloyd have more balanced route distributions and are less affected.

Environmental costs will reshape the industry landscape. Future regulations on carbon emissions will tighten. Large shipping companies can leverage economies of scale to achieve fleet “greening” at relatively low costs, but compliance costs for small and medium-sized firms will rise sharply. This means the industry will further consolidate around larger players.

Who Is Worth Buying? Who Should Be Avoided?

Based on the current industry situation, investing in shipping stocks should follow these principles:

Prioritize large shipping companies. Giants like Maersk (AMKBY) and Hapag-Lloyd (HPGLY), with market caps over $10 billion, have stronger cost control and risk resistance during downturns. Orient Overseas (OROVY), as one of the world’s top seven shipping firms, is also worth considering.

Be cautious with small- and mid-cap shipping companies. Smaller firms have limited survival space amid macro volatility and are more prone to elimination.

Route structure matters. Avoid stocks overly dependent on Far East-Europe/US routes. Under the backdrop of supply chain restructuring, growth momentum for these companies is significantly weakened.

Pay attention to fleet age. Companies with newer ships are better positioned to meet future environmental standards and can avoid future policy risks.

Investment Timing Is Critical

Shipping stocks are classic cyclical stocks. Investment should follow the big cycle—gradually accumulating at the bottom, holding long-term, and selling near the top.

What about the current timing? The Fed has not yet begun a meaningful rate cut, and signals of global economic recovery are still weak. This suggests shipping stocks may still undergo a period of adjustment. A wiser approach is to avoid rushing into full positions now, and instead patiently wait for clearer signs of economic recovery before gradually building positions.

Overall, shipping stocks will rise again, but this is not a short-term matter. Be prepared, choose the right targets, and get the timing right—these three points are indispensable.