Friday will “Hereby [be] known in #shipping as ‘Bloody Friday,’ ” J Mintzmyer, head of research at Value Investor’s Edge, tweeted.
Stock prices for shipping giants such as Zim Integrated Shipping Services (NYSE: ZIM), Genco Shipping (NYSE: GNK) and Eagle Bulk Shipping (NASDAQ: EGLE) experienced major drops Friday.
Experts said the decreases could be due to weakening manufacturing activity in the U.S. and a weakening demand for consumer goods as the country shifts to a post-pandemic economy.
Read: US import demand is dropping off a cliff
BofA downgrades Zim
Research analysts at BofA Securities on Friday downgraded Zim to underperform. BofA lowered its ocean multiple from 10x to 6x, below the multiple for Maersk due to higher levels of uncertainty. It also lowered Zim’s price objective from $79 to $40, 15% below the $47.23 at the time of the report.
The downgrade was based on “concerns over weaker U.S. demand.” The analysts said large American retailers have indicated spending on goods is falling and they have excess inventories.
Heightened demand for U.S. imports during the pandemic led to port congestion and skyrocketing ocean spot rates.
Given the slowing of consumer demand, “this congestion could unwind rapidly, in our view, driving a sharp correction in ocean spot rates,” the analysts said. “Zim’s largely chartered fleet and lower proportion of contracted volumes make it more exposed than other carriers to declining spot rates.”
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Kenny Coffin
It’s funny that the blame is on surplus stock and low demand but the shelves are still empty in a lot of places. It’s safer to argue that a price fix is on and to save money they are holding inventory until the prices go up. Orders made during tight shipping windows saw shelf prices at 30-50% higher shipping costs. Now the inventory is stale and the prices went down so the priced Covid inventory is basically worth less than when it was purchased and has lower resale value.
Therefore they need the carriers to lose the stock and claim insurance against it because selling it would be a 30-40% loss immediately. The hot potato is permanent detention for overpriced stocks.
J Free
During the pandemic, as the US and every other country talked about going from Just In Time from China to On-hand Stock models, the lack of warehouse space was highlighted. All the local warehouse space in my area is now marijuana farming.
Patrick Pascale
Like an over hyped fad, marijuana use may go up in smoke. goods and service flows will require warehouse space to be used in the distribution ,management, and movement of products within the corrected supply chain models.