Will shipping stocks go up again? Choosing the wrong direction could cost you everything. Check out the latest investment guide here.

The Truth About Shipping Stocks: Cycles Once Again Test Investors

First of all, shipping stocks are not a new concept. But many people buy shipping stocks without understanding the essence of the industry — it is a typical cyclical stock.

Imagine that when the global economy is good, international trade is active, various goods are transported across the sea, freight rates rise, and company performance soars. Conversely, when the economy contracts, trade shrinks, ships are idle, and company profits plummet. This is the fate of shipping stocks.

Looking at recent performance, you will see. In 2022, the world’s largest shipping company Maersk’s quarterly revenue peaked at $22.767 billion, with profits reaching $8.879 billion. By the second quarter of 2023? Revenue fell below $13 billion, and profits dropped to only $1.453 billion — a decline of 83%. During the same period, the market value of Germany’s Hapag-Lloyd shrank by nearly 70% from its 2022 peak.

Is it still worth buying shipping stocks now? It depends on several factors

1. The Fed’s attitude is shifting — this is a bullish signal

The Federal Reserve has raised the federal funds rate to a high of 5.50% to control inflation, directly suppressing global economic growth. As US inflation data gradually returns to a reasonable range, the cycle of rate cuts is imminent. Once the Fed begins to cut rates, the global economy will regain breathing space, international trade activities will rebound naturally, and shipping companies will have better days.

2. Supply chain restructuring is underway — choosing the wrong shipping stocks will lead to pitfalls

This is the most critical variable. The US is accelerating the relocation of manufacturing from China to countries like Mexico and India. What does this mean? It means demand for routes connecting China and North America will decline.

Taiwan’s leading shipping companies Evergreen and Yang Ming happen to heavily rely on the Far East–West Coast US route. From this perspective, their growth prospects will be significantly constrained. In contrast, global shipping companies like Maersk, with a more comprehensive route network, will be less affected.

3. Environmental costs — the moat for large enterprises, the Achilles’ heel for small ones

Future requirements for carbon emissions will only become stricter. This puts cost pressure on shipping companies but also creates a natural competitive barrier — only large-scale shipping companies can afford to “green” their fleets at lower costs.

Maersk employs 76,000 people with over 4 million TEU capacity, and Hapag-Lloyd has 1.8 million TEU. Companies of this size naturally have advantages in environmental transformation. Smaller and mid-sized shipping stocks will face heavy compliance costs.

4. Oil price fluctuations — ghosts of the Russia-Ukraine war and Middle East tensions

The ongoing escalation of the Russia-Ukraine war and Israeli-Palestinian conflict introduces uncertainty into the international crude oil market. Rising oil prices directly increase fuel costs for shipping companies, eroding profit margins. This is no small matter.

Will shipping stocks still rise — but you need to choose the right stocks

How to choose now? Practical investment guide

First layer screening: focus only on large companies

Market cap above $10 billion is the baseline. The reason is simple — shipping stocks are a macroeconomic barometer. When the industry is in downturn, small companies are eliminated directly. Large companies’ scale advantages help them weather the storm and maintain profitability.

Second layer screening: look at route layout

The lower the dependence on Far East–North America routes, the better. If a shipping company has 80% of its business on China-US trade routes, it’s a ticking time bomb amid supply chain restructuring. Companies like Maersk and Hapag-Lloyd, with global route networks, are safer.

Third layer screening: look at fleet age

New ships are better suited for environmental and green energy upgrades, leading to lower future compliance costs. This is not trivial — it could determine a shipping company’s future cost of regulation.

Who is worth buying among Evergreen, Yang Ming, Maersk, Hapag-Lloyd, and Orient Overseas?

Maersk (AMKBY) — Global shipping giant

• Founded in 1904, a century-old enterprise, operating in 130 countries
• Handles $675 billion worth of cargo annually, with over 4 million TEU capacity
• Advantages: Most comprehensive global route network, lowest environmental transformation costs
• Risks: Market cap has fallen 60% from its peak, waiting for fundamentals to recover

Hapag-Lloyd (HPGLY) — European shipping giant

• Operations in 600 ports worldwide, 1.8 million TEU capacity
• Advantages: Stable European routes, leading in environmental technology
• Risks: Market cap shrunk by 70%, valuation is relatively cheap but bottom is unclear

Orient Overseas (OROVY) — Chinese-backed regional leader

• Over 150 ships, over 10 million tons of capacity, one of the world’s top seven shipping companies
• Advantages: Chinese background provides policy support, strong cost control
• Risks: Under COSCO, with higher geopolitical risks

Evergreen (2603) — Taiwanese shipping leader

• Over 200 container ships, 1.6 million TEU capacity, serving 240 ports worldwide
• Advantages: Taiwan’s leading shipping company, relatively cheap valuation
• Risks: Highly dependent on Far East–Americas routes, most affected by supply chain de-China-ification

Yang Ming (2609) — Taiwan’s second shipping company

• Founded in 1972, operates in 170 ports across the globe, serving over 70 countries
• Advantages: Smaller market cap, more room for rebound
• Risks: Similarly highly dependent on Far East–Americas routes, risks similar to Evergreen

Final advice: Don’t rush to bottom-fish

Shipping stocks will rise — but not the time to rush in now.

The correct approach should be:

1. Wait until the federal funds rate clearly enters a rate-cutting cycle — this is the starting gun for a shipping rebound
2. Gradually allocate to large shipping stocks — especially those with a market cap of $10 billion+, to avoid single-point risks
3. Prioritize companies with global multi-route networks — Maersk, Hapag-Lloyd, and similar giants are more stable
4. Pay attention to fleet age — shipping stocks with a high proportion of new ships are worth holding long-term
5. Be mentally prepared for cyclical trading — buy in stages at the cycle bottom, sell near the top; this is the correct way to play shipping stocks

In simple terms: Choose big companies, wait for the right timing, prepare for long-term holding, and only get in at the cycle bottom.