Bad News Is Good News for Container Shipping Investors

You’ve probably heard this already, but if you haven’t started your Christmas shopping, it might be a good idea to do so as soon as this weekend. Shipping bottlenecks are expected to persist well into 2022, driven by slow capacity growth, a shortage of containers and truckers and the ongoing semiconductor chip crunch, which has limited new truck production for last mile delivery.

These “perfect storm” disruptions have created numerous headaches for shipping and logistics companies. But as is often the case, bad news is good news, especially for investors who have seen shares of container lines surge in the 18 months since the pandemic began.

A.P. Moller-Maersk, the world’s largest carrier, has sailed up close to 190% in Copenhagen trading. Last month, Bloomberg analysts forecast that Maersk’s 2021 net income will end up somewhere in the neighborhood of $16 billion, which would be a record for not just the company but for any Denmark-listed company. (Danish pharmaceutical company Novo Nordisk holds the current record after having reported over $6.5 billion in profits in 2020.)

Maersk's Profit
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This is all thanks, of course, to unheard-of shipping rates. The Freightos Baltic Index, which measures global container prices, currently stands at an average $10,321 per 40-foot container. A year ago, the same container cost exporters only $2,231, or about four-and-a-half times less, to ship. To send just one container from Shanghai to Los Angeles, companies must now cough up a jaw-dropping $17,478, according to Freightos.

Containers Shipping Rates Remain Elevated
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Looking at the chart above, you probably notice that rates are rolling over, and so you may infer that the market is in the process of normalizing. As much as that would provide consumers with some relief, we could be looking at several more months of global supply chain disruptions.