Are shipping stocks still worth bottom-fishing? Why are leading companies continuously plummeting?

Shipping Stocks Encounter “Waterloo”: From Peak to Trough

When it comes to shipping stocks, many investors still remember the crazy rally in 2022. But if you look at the latest chart now, you’ll see that this sector is undergoing a “drastic change.”

Since peaking in 2022, the global shipping giant Maersk’s stock has lost 60% of its market value. The same story applies to Germany’s second-largest shipping company, Hapag-Lloyd — from its high at the end of 2022 to now, its market cap has retraced nearly 70%. This is not coincidence but reflects deep-rooted issues in the industry.

Maersk’s performance data best illustrates the problem. In mid-2022, the company’s quarterly profit reached as high as $8.879 billion, but by Q2 2023, this figure plummeted to $1.453 billion — a decline of 83%. Revenue is no exception, dropping from a peak of $22.767 billion in 2022 to about $13 billion in Q2 2023, less than 60% of the highest point. What does this tell us? Global trade activity is clearly slowing down.

Shipping Stocks Are Cyclical and Hard to Escape: Why Do They Always “Ride the Roller Coaster”?

To understand the investment logic of shipping stocks, first recognize that this industry is inherently highly cyclical.

Boom Period: When global economic growth and international trade are active, demand for goods transportation surges, freight rates rise, and shipping companies enjoy hefty profits. The recovery cycle after the 2020 pandemic is a typical example — economies restart, supply chains are reconstructed, global trade becomes exceptionally hot, and shipping stocks soar.

Recession Period: When economic growth slows and trade activity diminishes, freight demand drops sharply. Coupled with aggressive rate hikes by the Federal Reserve, global economic growth stalls — this is the current reality. Shipping fleets become overcapacity, freight rates plummet, and profitability deteriorates rapidly. This is the fundamental reason why stocks of giants like Maersk have plummeted.

Key Variables to Watch When Investing in Shipping Stocks

Interest Rate Environment Determines the Boom-Bust Cycle

The Federal Reserve currently maintains the federal funds rate at a historic high of 5.50%, directly suppressing global economic growth. Once the Fed begins a rate-cutting cycle, the economy will have a chance to breathe, and demand for commodity trade may rebound, which is positive for shipping stocks. Conversely, if rates stay high, the industry will remain in difficulty.

Geopolitical Shocks Impact Costs

The ongoing conflicts in Ukraine and the Middle East are pushing up global crude oil prices, significantly increasing fuel costs for shipping companies. Higher oil prices mean narrower profit margins for shipping firms — a short-term constraint that is difficult to reverse.

Supply Chain Restructuring Alters Route Value

The US and Western countries are actively promoting a “de-Chinaization” strategy, shifting manufacturing and supply chains to Southeast Asia, Mexico, and other regions. This is “bad news” for shipping companies relying on traditional Far East–Americas/Europe routes. Companies like Evergreen (2603) and Yang Ming (2609) in Taiwan, with over-concentrated business on these routes, face significant risks. In contrast, Maersk and Hapag-Lloyd have more diversified global route networks, enhancing their resilience.

Environmental Costs Become a Competitive Divide

Stricter environmental standards are forcing shipping companies to upgrade their fleets. Large shipping firms, leveraging economies of scale, can achieve “greening” transformations at relatively low costs, gaining a competitive edge. However, for small and medium-sized shipping companies, these environmental costs create enormous pressure, potentially accelerating industry consolidation.

Which Shipping Stocks Are Worth Watching?

Based on the above analysis, here are the main listed shipping stocks globally:

Global Shipping Leaders

• Maersk (AMKBY): Founded in 1904, the world’s largest container carrier with over 4.1 million TEU capacity, operating in 130 countries. Although currently under pressure, its scale and risk resistance are unmatched.
• Hapag-Lloyd (HPGLY): Germany’s second-largest shipping company, with over 1.8 million TEU capacity, serving more than 600 ports worldwide.

Mid-sized Shipping Companies

• OOCL (OROVY): Founded in 1947, acquired by China COSCO Shipping Group in 2017 but still operates independently. Owns over 150 vessels with a capacity exceeding 10 million tons, one of the world’s top seven shipping firms.

Taiwan Shipping Leaders

• Evergreen (2603): Taiwan’s shipping giant, with over 200 container ships and a capacity of over 1.66 million TEU. Focused on Far East–Americas and Northern Europe routes.
• Yang Ming (2609): Established in 1972, with over 700,000 TEU capacity, operating in more than 170 ports globally, with over 5,000 employees.

The Right Approach to Investing in Shipping Stocks at Present

Considering the industry is at a cyclical low, investors should adopt a “disciplined” strategy:

Prioritize Large Companies: Shipping giants with market caps over $10 billion are better equipped to withstand macroeconomic risks. Small firms are most vulnerable at cycle bottoms.

Avoid Concentration Risks: Steer clear of companies heavily dependent on a single route. While Evergreen and Yang Ming are quality Taiwanese stocks, they face “de-Chinaization” impacts and require cautious assessment.

Focus on Fleet Age: Prefer companies with younger fleets, as they will have lower costs to meet future environmental standards and maintain competitiveness.

Gradual Positioning and Waiting for Rebound Signals: The best entry points for shipping stocks are often at the bottom of the economic cycle. It’s advisable to build positions gradually when the Fed signals a rate cut and global economic recovery is evident.

Overall View

Shipping stocks are classic cyclical investments, their performance almost entirely following global economic health. Although prices are low now, this also means risks have been largely priced in. Investors need not rush to buy the dip but should wait for clearer signs of economic recovery. When the Fed truly starts cutting rates and global trade activity improves significantly, the investment opportunities in shipping stocks will truly emerge.