CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
US English

Hapag-Lloyd and shipping stocks: Profits now, choppy waters ahead

By Jenni Reid

13:24, 26 April 2022

Hapag-Lloyd container ship in the Solent off Portsmouth, England
Hapag-Lloyd and other shipping firms have made bumper profits amid supply constraints and high demand – Photo: John Peter Photography / Alamy Stock Photo

Shipping firms have seen two years of massive – often record – growth and profit as soaring demand has met constrained supply. 

Firms from Germany’s Hapag-Lloyd (HLAG) to China’s COSCO Shipping Holdings (1919) to US-based Eagle Bulk Shipping (EGLE) saw their share prices rocket, and remain well above their pre-pandemic levels. 

On Tuesday morning, a trading update from Danish shipping giant Maersk (MAERSK-B) reporting that it brought in $19.3bn in revenue in Q1, with underlying earnings before interest and taxes (EBIT) of $7.9bn – higher than expectations. Maersk shares rose by 3.86% and Hapag-Lloyd also rose on optimism about the sector. 

Hapag-Lloyd (HLAG) share price

Maersk said an “exceptional market situation” had led to an average 71% increase in freight rates year-on-year. It added it expected these conditions to continue through Q2 and normalise after that, which combined with higher contracted rates it forecasts will deliver stronger full-year results of $24bn EBIT (up from $19bn). 

However, the company also noted that it was revising its outlook for the growth of global container demand from 2 to 4% to -1 to 1%.

Meanwhile, analysts have noted significant challenges are facing the shipping industry that are fuelling uncertainty. Are there signs it is running out of steam? 

What is your sentiment on HLAG?

174.485
Bullish
or
Bearish
Vote to see Traders sentiment!

Maersk share price

Maersk share price 2017-2022Maersk share price 2017-2022 – Credit: Trading View

Earnings peak?

Responding to Maersk’s raised guidance, Daniel Harlid, vice president, senior analyst at Moody’s, told Capital.com: “This is something that has already been built into our expectations – that 2022 will be another strong year for carriers.” 

“As is mentioned in the company announcement, the year-over-year increase in contracted rates – in 2021, around 70% of Maersk’s long-haul volume was shipped on long term contracts – will more than offset the decline in volumes caused by the current uncertain macro environment,” Harlid added.

In an April report, Moody’s analysts noted high volatility in the shipping market generally and said earnings were likely to have peaked while still remaining strong. 

Choppy waters

Simon Heaney, senior manager for container research at consultancy Drewry, said the short- and long-term unpredictability around the shipping industry was the most extreme he had seen in his 20 years’ work. 

“Congestion and supply chain issues are currently the number one market driver, and have been for the two years of the pandemic,” he told Capital.com on a call. 

XRP/USD

0.51 Price
+0.410% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01192

BTC/USD

26,181.25 Price
-0.600% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 85.00

ETH/USD

1,586.62 Price
-0.160% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 5.40

US100

14,543.60 Price
-1.650% 1D Chg, %
Long position overnight fee -0.0262%
Short position overnight fee 0.0039%
Overnight fee time 21:00 (UTC)
Spread 1.8

“Logistics capacity was stripped at a time of high demand, and as long as that inefficiency is still there, carriers will continue to profit. The question is how long that will last. Eventually things will normalise, and if you kick away that pillar, the market fundamentals are not quite as strong.” 

Eagle Bulk Shipping (EGLE) share price

Heaney said carriers were facing a laundry list of challenges: higher oil prices and bunker costs; Covid lockdowns in China hampering factory production, reducing the flow of goods; rising operating expenses, including soaring ship prices; pressures to invest in decarbonising and modernising fleets; for some firms, the Russia-Ukraine war; and the consequent negative pressure on demand, which was already teetering with inflation rising. 

 

“Covid has been a rising tide for all shipping lines. Now they are all subject to the same risks, with slight variations depending on their customer mix, where they trade most, the proportion of their fleet that is chartered,” Heaney said. 

Overall, the China-Covid situation will be of most concern to carriers, he explained. 

“The concern is going back to that phase 1 of the pandemic will choke off demand by artificially disrupting flow of goods out of the factory gates. Then the ability to get cargo on ships will slow because the goods don’t exist – and that will expedite the recovery of supply chains because it will give breathing space, ports will be able to catch up, warehousing, trucking and supply chains will move towards their pre-pandemic efficiency levels.” 

But ultimately, he said, it was too early to say for sure that was happening. Chinese factory activity declined in March, but Heaney stressed that was only one reading and that what happens across the global economy is going to be key to how fast supply chain recovers. 

Last year the industry reported collective EBIT of $214bn, which dwarfed anything before, which Drewry has calculated could rise to $300bn this year – but various factors could affect that, Heaney noted.

“So much volatility really is a headache for forecasters like us,” he said. 

Markets in this article

1919
COSCO Shipping
8.12 USD
-0.12 -1.480%
HLAG
HAPAG-LLOYD AG NA O.N.
174.485 USD
1.1 +0.640%

Rate this article

Related reading

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?

Join the 555.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading