Recently researching whether shipping stocks will rise again, I discovered quite a few interesting things.

The shipping industry is actually very special. The lifeblood of global trade is in the hands of these shipping companies, but their stock prices are like roller coasters. I looked at data from the past ten or so years, and shipping stocks do indeed surge during good economic times, but once the economy slows down or trade declines, their prices get hit hard.

During the pandemic in 2020, shipping stocks nearly collapsed, but after the pandemic eased, they rebounded strongly. However, this rebound didn’t last long. By mid-2022, the stock prices of major global shipping companies like Maersk fell by 60% from their highs, and Germany’s Hapag-Lloyd dropped nearly 70%. The performance of these companies has also been declining. Take Maersk as an example: in mid-2022, quarterly profits still reached $8.8 billion, but by Q2 2023, it was only $1.45 billion, a decline of over 80%.

So, will shipping stocks go up again? I think it depends on several key factors. First is the Federal Reserve’s interest rate policy. Currently, the federal funds rate remains high, which suppresses global economic growth. Once interest rates start to decline and the global economy resumes growth, shipping demand will naturally increase. That would be a positive sign for shipping stocks.

On the other hand, I’m a bit worried about the intensifying US-China trade tensions. The West is pushing for supply chain de-Chinaization, with many orders moving from China to Mexico and other places. This means that shipping companies relying on trans-Pacific routes from East Asia to the Americas will face significant impacts. Taiwan’s two leading shipping giants, Evergreen and Yang Ming, mainly operate these routes, so their growth prospects might be limited. In contrast, Maersk and Hapag-Lloyd have more diversified routes, so the impact might be smaller.

Environmental costs are another concern. Future regulations on carbon emissions will become stricter, increasing operational costs. But this actually favors large shipping companies because they have scale advantages, allowing them to green their fleets at lower costs. Smaller and medium-sized shipping firms might be pushed out of the market.

Oil prices are also a variable. Ongoing conflicts like the Russia-Ukraine war and the Israel-Palestine conflict could push crude oil prices higher, which would directly eat into shipping companies’ profits.

Therefore, I believe there are still opportunities in shipping stocks, but it’s crucial to pick the right targets. Large shipping companies with scale and cost advantages are better equipped to withstand risks. Giants like Maersk and Hapag-Lloyd, with market caps over a hundred billion dollars, are more likely to survive industry downturns. Conversely, I would avoid shipping stocks that rely heavily on specific routes or have very small market caps.

For investment strategies, I suggest gradually accumulating during the industry’s bottom cycle and holding long-term, then selling at the cycle’s peak. Only then can you truly profit from the cyclical nature of shipping stocks. Most importantly, keep a close eye on the global economy, because the rise and fall of shipping stocks ultimately depend on macroeconomic conditions.