Container Shipping Companies: Recent Stock Price Developments
By: Jan Nassauer
Tags: Shipping, Container Shipping, Stock Market, Shipping Companies, Logistics

Container Shipping Companies: Recent Stock Price Developments

As you have probably heard by now, container shipping companies are lately celebrating extraordinary financial results after years of rather unprofitable operations.

Curious about how this would be reflected on the stock market, I began looking at some charts, soon with some element of surprise.

On March 23rd 2021, the Taiwanese carrier Evergreen Marine Corp. made the news by getting their container vessel “EVER GIVEN” stuck in the Suez Canal. After blocking the entire canal and disrupting global trade for six days, the vessel was eventually impounded by the government of Egypt for three months before setting sail again. As you can see from the chart above, there seems to be no such thing as bad publicity, as the stock price of Evergreen took off like Michael Jordan at the 1988 NBA Slam Dunk Contest.

Almost every chart I looked at showed a very similar development pattern of surging stock prices since the beginning of the year 2021. So I put together a small “Container Shipping Stock Market Index” (CSSMI).

The CSSMI is computed from normalized stock prices of six large container shipping companies (Hapag-Lloyd, Maersk, Cosco, Evergreen, Hyundai and Yang Ming). Bear in mind that two of the three biggest carriers (MSC and CMA CGM) are privately owned companies, so I couldn’t include their data.

The components of the CSSMI are weighted based on the TEU capacity of the six carriers (so the stock prices of Maersk with 4,231,457 TEU are weighted higher than Yang Ming’s at 625,332 TEU).

The below visualization compares the performance of the CSSMI to the Standard and Poor’s 500 index (S&P 500).

The CSSMI has outperformed the S&P 500 significantly since the end of 2020.

The Shanghai Containerized Freight Index (SCFI) indexes spot prices for container export traffics from Shanghai to 15 worldwide destinations. Only spot prices are indexed, while the majority of containers are shipped on contract rates. But spot prices are often considered an important indicator for future contract prices. And two of the main driving variables of stock prices are profits and the expectations of future profits (unless, of course, they are not).

The below plot suggests that both the SCFI and the CSSMI started trending upwards around the same time.

Are the high stock prices a market overreaction or a market correction? Once freight spot prices will level off from their current all-time high, how fast will stock prices follow suit?

Most experts have been completely wrong about their predictions for 2021. In all fairness, a disruptive event like COVID-19 makes the future extraordinarily hard to predict.

Due to lockdowns, congestions, excess demand and completely out of sync global supply chains, the numerous influencing variables of market mechanisms are even more difficult to predict than under normal circumstances.

Though a lot of numerical information about the past is available, it is currently not completely reasonable to assume that aspects of past patterns will continue into the future.

Now would probably be a good time to remember the limitations of forecasting and think about hiring some dart-throwing monkeys.

Photo by Jamie Haughton on Unsplash

“people who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys who would have distributed their choices evenly over the options. Even in the region they knew best, experts were not significantly better than nonspecialists.”

(Daniel Kahneman, “Thinking, Fast and Slow”)

In all seriousness, there are much better approaches than that. But I will save them for another day.

Notes:

All data analyzed and visualized with Python Pandas and Matplotlib, using the fantastic, free Yahoo Finance API. The practical upshot of coding is that any future analysis will run almost completely automated. If you are interested in the code or the process, please feel free to contact me.