Are shipping stocks still a chance? Uncover the future growth drivers and investment traps

The Past and Present of the Shipping Industry

The performance of shipping stocks over the past two years has left many investors puzzled. Once a dominant industry leader in 2022, the sector has now faded into the background. Take Maersk, the world’s largest shipping company, for example—its market value has fallen by 60% from its peak in 2022, and Germany’s Hapag-Lloyd AG has retraced nearly 70%.

This collapse in stock prices is not unfounded. Behind it lies a sharp decline in performance—Maersk’s quarterly revenue dropped from $22.767 billion in 2022 to less than $13 billion in Q2 2023, with quarterly profits plunging 83%, from $8.879 billion to $1.453 billion. The once-glamorous financial figures have now become investors’ nightmares.

Can the Future of Shipping Stocks Reverse? What Are the Key Factors?

Despite the bleak current situation, the future of shipping stocks still contains multiple variables. Investors need to understand how these factors influence industry prospects.

First, the policy shift of the Federal Reserve is a crucial catalyst. Currently, the federal funds rate stands at 5.50%, and this high-interest environment is suppressing global economic growth. As US inflation gradually normalizes, the Fed will inevitably start cutting rates. Once rates decline, the global economy will gain breathing room, stimulating a recovery in international trade, which is vital for the future revival of shipping stocks.

Second, the reconfiguration of the global supply chain is a double-edged sword. Western economies are accelerating efforts to localize and nearshore supply chains, with many manufacturing industries shifting from China to Mexico, India, and other countries. This means that freight volume on traditional Far East to Europe and America routes may decrease, posing challenges to companies heavily reliant on these routes, such as Evergreen and Yang Ming. However, diversification of global routes could present opportunities for companies like Maersk with broader capacity distribution.

Third, energy costs and geopolitical risks cannot be ignored. The ongoing Russia-Ukraine conflict and the worsening situation in the Middle East have increased uncertainty around oil prices, and rising oil prices directly erode shipping companies’ profit margins. In this unstable environment, cost control capabilities become a key factor in competitive advantage.

Fourth, environmental compliance is becoming a new dividing line in competition. Future regulations on carbon emissions will tighten further, requiring shipping companies to invest capital in greening their fleets. Large shipping firms like Maersk and Hapag-Lloyd can leverage scale advantages to complete this transition at relatively low costs, while small and medium-sized companies will face greater cost pressures.

Analysis of Currently Investable Shipping Stocks

Most of the global shipping industry consists of private companies, making direct investment difficult for ordinary investors. In the public markets, the OTC market in the US and Taiwan’s stock market offer several main options:

International giants: Maersk (stock code AMKBY), founded in 1904, has become a global transportation hub, with an annual cargo value of approximately $675 billion and over 76,000 employees. Despite recent difficulties, its global route network and scale advantages remain significant. Hapag-Lloyd (HPGLY) is also an international shipping operator, operating at 600 ports worldwide with a capacity of 1.8 million TEUs.

Regional leaders: Orient Overseas (OROVY), although acquired by China COSCO Shipping Corporation, still operates as an independent entity with a large fleet of over 150 vessels. Taiwan’s two shipping giants—Evergreen (2603) and Yang Ming (2609)—are the local leaders. Evergreen is Taiwan’s shipping leader, with over 200 container ships operating in 240 ports worldwide; Yang Ming is known for its international logistics services, serving over 70 countries.

Practical Investment Advice for Shipping Stocks

Based on the analysis of the future of shipping stocks, the following investment strategies are worth considering:

Prioritize large industry leaders. Shipping giants with a market capitalization over $10 billion have stronger risk resistance. During macroeconomic fluctuations, large companies can spread costs through scale, while small and medium-sized firms are more likely to exit during cyclical lows.

Beware of targets overly dependent on a single route. In the context of global supply chain reconfiguration, companies overly reliant on Far East to Americas/Europe routes face greater risks. This is especially important for Taiwanese companies like Evergreen and Yang Ming, which focus heavily on these routes.

Pay attention to fleet age structure. Investing in shipping stocks with newer vessels can reduce future costs and risks associated with environmental compliance. Companies with newer fleets are more competitive in green transformation.

Prepare psychologically for cyclical investing. Shipping stocks are inherently cyclical. Investors should stagger their positions at the bottom of the cycle, hold long-term, and exit near the cycle’s peak. This is not short-term trading but a macro-cycle approach.

Summary: The Future of Shipping Stocks Is Uncertain but Traceable

The future of shipping stocks depends on the recovery trajectory of the global economy, the final configuration of supply chains, fluctuations in energy prices, and the enforcement of environmental policies. These factors are still evolving, and there are no definitive answers.

However, for investors, understanding these driving forces is already half the battle. Those interested in entering this field should continuously monitor economic data and geopolitical developments, enter during macro-cycle lows, and select large, risk-resistant, and well-diversified targets.

The opportunities and risks in shipping stocks coexist. The key is to find the right timing and the right targets.