Essential Guide to Shipping Stocks Investment: From Industry Cycles to Individual Stock Selection

Shipping stocks have performed like a roller coaster in recent years. From the peak in 2022 to the current downturn, many investors are pondering one question: Does this industry still have investment value? The answer is yes, but only if you understand the essence of the industry and the future trend.

Why Are Shipping Stocks Worth Paying Attention To?

99% of global trade relies on maritime transportation. Whether it’s energy, raw materials, or consumer goods, they are all transported worldwide by massive fleets. This means that the performance of shipping stocks directly reflects the health of global economic activity—during economic booms, shipping stocks thrive; during recessions, they are hit hardest.

This is precisely why shipping stocks attract investors: they are a barometer of economic cycles and a good tool for cycle trading.

The Cycle Dilemma of Shipping Stocks: Why Did Prices Plummet After 2022?

The Dow Jones Global Shipping Index from 2011 to 2023 clearly shows the industry’s volatility. Especially after the sharp decline caused by the pandemic in 2020, shipping stocks experienced a strong rebound, but this rally peaked in mid-2022 and then abruptly stopped.

The performance of leading companies illustrates the issue more clearly:

Maersk, the world’s largest shipping company, saw its market value drop 60% from its all-time high in early 2022. The second-largest, Hapag-Lloyd AG, also retraced nearly 70% from its peak at the end of 2022. This is not just market sentiment fluctuation but a reflection of real deterioration in fundamentals.

Taking Maersk as an example, its quarterly revenue declined from a peak of $22.767 billion in 2022 to only $13 billion in Q2 2023, a 43% drop. Even more startling is the collapse in profitability: quarterly profit in mid-2022 reached as high as $8.879 billion, but by Q2 2023, it was only $1.453 billion, an 83% decline.

What does this reflect? During the pandemic, global supply chain disruptions caused freight rates to soar, allowing shipping companies to earn huge profits. But as supply chains normalized and capacity became oversupplied, freight rates returned to rational levels, and company performance plummeted. This is a typical characteristic of cyclical industries.

Global Shipping Landscape: Who Are the Players Worth Watching?

The shipping industry has a characteristic: most of the truly dominant companies are private firms, such as Switzerland’s Mediterranean Shipping Company and France’s CMA CGM Group, which are not directly accessible to retail investors. However, there are still some publicly listed companies worth paying attention to.

US-listed Shipping Stocks

Maersk (AMKBY)
As the world’s largest shipping company, Maersk operates in 130 countries, handling approximately $675 billion worth of cargo annually, with 76,000 employees and a total capacity of 4.18 million TEUs. Although listed on the Danish stock exchange, US investors can buy shares via the pink sheets. Founded in 1904, it is a truly century-old enterprise.

Hapag-Lloyd (HPGLY)
Founded in 1970, with a global capacity of 1.8 million TEUs, operating at 600 ports worldwide, serving 130 countries. Also available on the US pink sheets.

Orient Overseas (OROVY)
Founded in 1947 by Chinese businessman Tung Hsiao-yun, entered container shipping in 1969. Owns over 150 ships with a total capacity exceeding 10 million tons, making it one of the world’s top seven shipping companies. Although acquired by COSCO Shipping in 2017, its stock still trades on the exchange.

Taiwan-listed Shipping Stocks

Evergreen (2603)
Taiwan’s leading shipping company, with a market cap of NT$36.5082 billion. Operates trade routes connecting the Far East with the Americas, the Southern Hemisphere, Northern Europe, and the Eastern Mediterranean. Fleet of over 200 container ships, total capacity of 1.68 million TEUs, serving 240 ports worldwide.

Yang Ming (2609)
Founded in 1972, also a Taiwan-based shipping company, with a market cap of NT$17.6 billion. Serves over 70 countries across 170 ports globally, with more than 5,000 employees and a capacity of 705,600 TEUs.

Four Major Factors Determining the Outlook of Shipping Stocks

1. Federal Reserve Interest Rate Policy Sets the Economic Temperature

Currently, the US Federal Reserve’s benchmark rate is at 5.50%, directly suppressing global economic growth. As US inflation data gradually returns to normal, the Fed will likely start cutting rates. Once the economy gains breathing room, global trade activity will recover, increasing demand for shipping services—this is a clear positive for shipping stocks.

2. The Double-Edged Sword of De-Globalization from China

Western economies are promoting supply chain localization and nearshoring. The US is shifting manufacturing from China to Mexico, which will directly impact routes connecting China and North America. Evergreen and Yang Ming heavily depend on Far East to West Coast/East Coast routes, so this trend poses a long-term challenge for them. Meanwhile, Maersk and Hapag-Lloyd have more diversified routes and are less affected.

3. Geopolitical Risks and Oil Price Fluctuations

Ongoing conflicts like the Russia-Ukraine war and the Israeli-Palestinian conflict introduce uncertainty into the international crude oil market. Rising oil prices directly increase fuel costs for shipping companies, squeezing profit margins. This systemic risk cannot be fully predicted.

4. Environmental Compliance Costs Favor Larger Companies

Future restrictions on carbon emissions will tighten. Large shipping companies, leveraging economies of scale, can more cost-effectively “green” their fleets and gain a significant cost advantage over smaller competitors. Companies like Maersk and Hapag-Lloyd, with their extensive fleets, may actually benefit from environmental trends.

Core Investment Advice for Shipping Stocks

Based on the above analysis, investors should follow these principles:

Prioritize large shipping companies. Leading firms with a market cap over $10 billion have stronger cost control and risk resilience during industry downturns. Maersk, Hapag-Lloyd, Evergreen, etc., meet this criterion.

Avoid small-cap shipping stocks. Macroeconomic fluctuations have a huge impact on the industry, and smaller firms are less able to survive cyclical downturns.

Stay away from companies overly dependent on a single route. Especially avoid stocks mainly operating routes from Far East to the Americas/Europe, as the de-coupling trend between China and the US is irreversible.

Pay attention to fleet age. Newer ships are better positioned to meet future environmental standards and can reduce long-term compliance costs.

How to Implement Cycle Trading Strategies?

Investing in shipping stocks should be cyclical rather than long-term holding.

Build positions gradually during industry lows or near-lows. When economic growth prospects become clearer and the Fed is about to enter a rate-cutting cycle, it’s an ideal time to consider gradually entering.

During holding periods, continuously monitor macroeconomic indicators, global trade data, and quarterly earnings. When industry metrics strengthen and profits recover, gradually reduce positions.

Finally, sell all holdings near the cycle top and wait for the next cycle. Only then can you truly seize investment opportunities in shipping stocks.

Conclusion

Shipping stocks are fundamentally investment assets of economic cycles, not suitable for conservative investors seeking stable cash flow. But for those who understand cycles, can wait patiently, and dare to go against the crowd in despair, shipping stocks may be the most efficient cycle trading tool.

Currently, the global economy is slowing down, but the Fed is about to enter a rate-cutting cycle, and the bottom of shipping stocks is gradually forming. Forward-looking investors should start preparing and wait for the next wave of cycles.