Shipping Stocks Investment Guide: Who Should Buy? Who Should Avoid?

Want to make a profit in the stock market? Shipping stocks might be an opportunity you’ve overlooked. But before jumping in, you need to understand—what is the current state of this industry?

Why Do Shipping Stocks Experience Such Volatility?

Talking about shipping stocks, we have to start with global trade. Shipping companies are responsible for transporting over 90% of the world’s goods, connecting supply chains across the globe. During economic booms, trade volume skyrockets, and shipping companies make huge profits; when the economy contracts, demand cools off instantly, and stock prices plummet.

That’s why shipping stocks are so volatile. When the pandemic broke out in 2020, the entire industry faced a near-collapse, with many giants teetering on the brink of bankruptcy. But the rebound after the pandemic was equally fierce—between 2021 and 2022, the surge in shipping stocks was simply astonishing.

However, the good times didn’t last long. After 2022, this wave of benefits completely faded. Just look at the data: the world’s largest shipping company Maersk peaked in early 2022, and its market value has since fallen by 60%. Germany’s Hapag-Lloyd also struggled, with a market cap nearly 70% lower than at the end of 2022.

Earnings Decline Is the Real Killer

Don’t just look at stock prices; examining earnings makes it even clearer. Maersk’s quarterly revenue, which peaked at $22.767 billion USD in 2022, slid down to less than $13 billion USD in Q2 2023, less than 60% of the peak. Even more alarming is profit—quarterly net profit dropped from $8.879 billion USD to just $1.453 billion USD, a decline of 83%.

This isn’t just a market correction; it’s a deep recession across the entire industry. Falling global trade volume, overcapacity, insufficient demand—these factors are reshaping the shipping landscape.

Which Shipping Stocks Should You Choose?

Prioritize Large Companies, Avoid Small Ones

The harsh truth about shipping stocks is: only the big fish survive. Maersk, Hapag-Lloyd, and Orient Overseas Container Line (OOCL), with market caps in the hundreds of billions USD, have enough financial buffer to weather downturns. They can spread costs through scale and remain competitive during industry slumps. In contrast, small and medium-sized shipping companies often lack the capacity to survive tough times.

Location Matters

Taiwan’s two shipping giants, Evergreen and Yang Ming, mainly operate routes from the Far East to the Americas and Northern Europe. Sounds good, but the problem is: as US-China trade tensions escalate, Western countries are accelerating decoupling from China’s supply chain. The US is shifting factories to Mexico, directly impacting companies relying on Far East–America routes.

In comparison, Maersk and Hapag-Lloyd have more diversified, global route networks, less affected by geopolitical issues. If you’re worried about worsening US-China trade relations, consider companies with multi-route layouts.

Comparison of Market Cap and Fleet Capacity:

• Maersk: $22.82B USD market cap, transports 4.18 million TEUs annually
• Hapag-Lloyd: $27.06B USD market cap, capacity of 1.8 million TEUs
• OOCL: $10.16B USD market cap, one of the world’s top seven shipping companies
• Evergreen: NT$365.082B market cap, capacity of 1.66 million TEUs
• Yang Ming: NT$176B market cap, covers 170 ports worldwide

What Does the Future Hold for Shipping Stocks?

Bullish Factors

If the Federal Reserve starts cutting interest rates (the federal funds rate is currently at 5.5%), the global economy could get some relief. Lower interest rates will stimulate demand, and global trade activity is likely to recover. This would be a direct positive for shipping stocks.

Of course, this depends on the global economy truly rebounding. A manufacturing rebound and increased commodity demand are signals that the shipping industry could take off.

Bearish Factors

First, oil price volatility. The Russia-Ukraine war and instability in the Middle East could push crude oil prices higher. Fuel costs significantly impact shipping companies’ profitability—every 10% increase in oil prices could directly erode a large portion of their profits.

Second, environmental costs. Future regulations on carbon emissions will become stricter. This is beneficial for large companies (they have the resources to upgrade fleets), but for small and medium-sized shipping firms, it will be a heavy burden.

Third, supply chain restructuring. Western countries are promoting “nearshoring” and “friendshoring” production. This means more manufacturing will move away from China to Southeast Asia, Mexico, and other regions. Long-term, this will change global trade flows, and demand for some traditional routes will decline sharply.

How to Invest Wisely?

First, scale is fundamental

Only buy shipping stocks with a market cap over $10 billion USD. Small companies may look attractive during boom times, but once the industry downturn hits, they have no room to maneuver. Large companies have better risk resilience.

Second, avoid high-risk routes

Be cautious with companies heavily reliant on specific routes. Especially those mainly operating Far East–Europe/America routes. Supply chain adjustments will directly impact their performance.

Third, prioritize companies with younger fleets

Newer ships mean lower fuel consumption, better environmental compliance, and lower maintenance costs. These companies will face fewer regulatory costs in the future and will be more competitive.

Fourth, prepare for cyclical trading

Shipping stocks are classic cyclical industries. Don’t chase highs; instead, buy in stages at the bottom of the cycle, hold long-term, and sell in parts near the cycle’s peak. This industry needs “long-term capital” and isn’t suitable for short-term speculation.

Final Advice

Shipping stocks aren’t gambling, but they do require a clear understanding of macroeconomics. When will the global economy truly recover? How will geopolitical situations develop? Can oil prices stabilize? How strong will environmental policies be? All these factors will directly influence your returns.

Thinking of investing in shipping stocks? Ask yourself three questions: Do you believe in the upcoming economic outlook? Can you tolerate years of volatility? Which companies’ geographic advantages do you prefer? Think carefully before acting—don’t be scared off by short-term fluctuations.