Container Carrier Stocks Decline as Red Sea Crisis Influence Wanes

Container Carrier Stocks Decline as Red Sea Crisis Influence Wanes
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In a recent turn of events, container carrier stock prices have experienced a significant downturn following the fading impact of the crisis in the Red Sea. Since December, these stocks had been on an upward trajectory, largely fueled by the turmoil in the Red Sea and the anticipation of heightened ton-mile demand. However, the latest correction in stock prices has outpaced the decline in freight rates, with most lines now trading below their pre-conflict levels.

At the onset of this week, the majority of surveyed container lines found themselves trading below their prices before the Houthi attacks on October 7. Notably, Evergreen Marine stood out as the sole surveyed line trading at a premium compared to its pre-conflict price. The driving force behind this shift in stock prices has shifted from capacity re-routing to poor financial earnings, with the release of generally weak Q4 earnings exacerbating a downward trend that had initiated back in February.

Medium-tier carriers such as OOIL, COSCO, HMM, and ZIM have seen their stock prices plummet below or, in the case of COSCO, return to pre-conflict levels. Immediately after announcing financials, OOIL and ZIM witnessed a significant 17% and 14% decrease in their share prices, respectively. Furthermore, Maersk and Hapag-Lloyd find themselves even further below pre-conflict levels, with both carriers reporting wide and potentially lowest earnings forecasts for 2024. Conversely, Evergreen, maintaining its position above the October reference, reported one of the highest operating margins for Q4 and ranked among the top three performers in 2023.

This downward trend in stock prices stands in contrast to freight rates, which although also experiencing a decline, remain relatively firm compared to pre-conflict levels. The Shipping China Containerized Freight Index (SCFI) recorded its sixth consecutive weekly decline on Monday, dropping by 23% from early January highs to 1,733 points. However, the index still reflects a significant increase of nearly 95% compared to October 1. Throughout 2024, the SCFI has averaged 2,035 points, a stark difference from the average of 1,004 over 2023 and 811 in the pre-COVID year of 2019. Carriers have cited a 25-30% increase in costs since 2019, contributing to the ongoing challenges in the industry.

Source: Alphaliner

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