Shipping Stocks Surge in 2024: Which Ones Should Investors Keep on Their Radar
Volatile shipping stocks have rebounded amid global geopolitical tensions, with the shipping sector $Marine Shipping (LIST2485.US)$ soaring nearly 30% so far in 2024.
In the latest trading session, $ZIM Integrated Shipping (ZIM.US)$ closed at $17.59, marking a +8.31% move from the previous day. Shares of this container shipping company have appreciated by 78.22% since the start of 2024.
$Navios Maritime (NMM.US)$ and $Golden Ocean (GOGL.US)$ have also risen 68.54% and 56.99% respectively in Year-To-Date (YTD) performance.
Source: moomoo
Why Do Shipping Stocks Gain in Times of Geopolitical Crisis?
Geopolitical tensions boost freight rates
The attacks by Yemen’s Houthi militants on vessels in the Red Sea disrupted maritime trade. As a result, many shipping companies hit the pause button as far as transit through this route is concerned. Keeping the safety of their crew in mind, they have adopted the longer and costlier route around the Cape of Good Hope in South Africa rather than through the Suez Canal. The reduced container availability due to the Red Sea tensions has resulted in a rise in freight costs. Lower capacity is expected to boost earnings. Rates are likely to remain high for quite some time, which may translate into further upside potential for shipping stocks.
Due to Red Sea attacks, shipping giant Maersk could cut capacity by 20%
Disruption to Red Sea container shipping is rising, Maersk said on last Monday, forecasting this will cut the industry's capacity between Asia and Europe by up to 20% in the second quarter.
"The risk zone has expanded, and attacks are reaching further offshore," Denmark's Maersk said.
"This has forced our vessels to lengthen their journey further, resulting in additional time and costs to get your cargo to its destination for the time being," it added in an updated advisory to customers.
Maersk's fuel costs on the affected routes between Asia and Europe are now 40% higher per journey, a spokesperson said.
Meanwhile, major shipping companies announced freight rate increases starting in May
Due to the continuous reduction of shifts by shipping companies, insufficient shipping space, soaring oil prices, rising fuel costs and other factors, a number of shipping companies have announced a new round of freight rate adjustment plans. At present, shipping companies Hapo Lloyd, Maersk, Dafei and MSC have successively announced an increase in the comprehensive rate increase surcharge (GRI) of 540-1250 US dollars.
Moreover, the demand side also continues to pick up, with international trade demand improving. Whether it is the retail sales growth rate in the US or the manufacturing PMI trend in major emerging countries, they are all in an upward stage.
Source: Yahoo Finance, Reuters, CNBC
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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