The share prices of leading container shipping companies are plummeting as recessionary fears rise.
Shares in leading carriers including Hapag-Lloyd, AP Moller-Maersk and Zim have dropped by 20 percent to 40 percent in recent weeks, wiping billions of dollars from market values.
The declines come amid worries over the impact of higher inflation and rising interest rates on container shipping demand.
Hardest hit is German liner operator Hapag-Lloyd.
The company had an eye-watering $30 billion (€28.6 billion) wiped off its market capitalization in a month, according to the company’s market cap.
The Frankfurt-listed carrier remains the most valuable liner company — ahead of even Maersk.
But its share price has been routed over the past month, dropping 40 percent to €267.50 ($281) on June 22, down from €448 ($470) on May 25.
Steep declines have seen Maersk’s stock price drop by more than one-third this year, with the Danish liner giant being valued at $44 billion (€42 billion).
That is around $20 billion (€10 billion) less than the Copenhagen-based company was worth before Russia invaded Ukraine and its lowest value in over a year. The decline follows a drop of 20 percent to DKK 17,010 ($2,405/€2,286) in the stock price since the start of June.
Similarly, NYSE-listed Zim has seen its market capitalization drop by 40 percent, or $4 billion (€3.8 billion), from a peak of around $10 billion (€9.5 billion) on March 19.
The carrier is currently valued at $6.16 billion (€5.8 billion). That follows a 26 percent drop in share value over the past three weeks to $51.33 (€48.87) by June 22.
Recessionary fears
The declines come amid fears that inflation and rising interest rates could reduce demand for container shipping services from Asia to Europe and the US.
Seafood companies, like businesses in many other industries, have suffered from runaway shipping rates and lengthy delays at ports linked to the global container shipping crisis that began with the onset of the pandemic in early 2020.
An increasingly challenging macroeconomic environment would impact consumer spending, in turn hurting container volumes, said analysts.
That has led to sharp falls in spot freight rates, which continue to drop as recession fears dampen peak season demand, according to analyst Linerlytica.
- Reefer: Refrigerated container
- teu: 20-foot equivalent unit used to measure container sizes
- feu: 40-foot equivalent unit used to measure container sizes
- Blank sailing: This could mean a vessel is skipping one port, or that the entire string is canceled.
- Panamax vessel: The maximum size of a ship that can transit the Panama Canal, ranging in length between 200 and 250 meters (650 and 820 feet) wth capacities of 50,000 to 80,000 dry weight tonnage.
Freight rates from Asia to the US west coast slumped to $8,934 (€8,506) per 40-foot equivalent unit (feu) on June 21, according to the Freightos Baltic Index.
Some carriers are reportedly offering rates below $7,000 (€6,665) per feu, which is less than half the average of about $15,000 (€14,281) per feu for most of the year.
The drop in spot rates is due to increased capacity, even though demand is picking up in the run-up to peak season, said Linerlytica.
“The window for the next transpacific rate hike has been pushed back to mid-July, but its success will depend on how strong cargo demand turns out over the coming weeks,” it added.
Despite the worsening economic scenario, some analysts remain unworried as earnings from long-term freight rates remain at record levels.
“Contract volumes are softening, but we expect earnings to stay strong, aided by contract earnings,” according to a research note by analyst Kepler Cheuvreux (Kech).
“The decline in spot rates seems to have flattened out,” it added in a note explaining why it remains bullish on Hapag-Lloyd stock.
The expectation is that supply-chain issues will remain a problem into 2023, with little sign that congestion will disappear before the end of the year, Kech noted.
Not out of the woods
The warning of lingering congestion comes as strikes in north European ports threaten to exacerbate terminal problems.
Maersk said in an advisory that congestion in the Bremerhaven hub had reached a “critical level”, while yard density in Hamburg remained “challengingly high”.
The Danish carrier said that teams are assessing if redirecting to nearby facilities — such as Gdansk, Wilhelmshaven or Zeebrugge — could speed up delivery. The company is also looking at shipping more containers overland from Asia to less congested North European ports.
Yet there seems to be no let-up to the industrial action, including workers at the port of Antwerp-Bruges in Belgium, and rail strikes in the UK affecting container shipments.
“Bottlenecks” across the Asia-North Europe network have led to an accumulation of delays, Maersk said.
The company said that “even a minor disruption can cause a ripple effect and lead to substantial setbacks”.
The outlook for the coming months remains uncertain.
“We are seeing economic headwinds left, right, and center,” Xeneta chief analyst Peter Sand said.
But weaker retail demand and higher inflation could act as a catalyst for unwinding the locked supply chains, he added.
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