After paying its generous dividend, shipping firm Zim Integrated Shipping Services (ZIM) plunged in the
last week. Investors are deeply concerned that freight traffic is slowing. This will hurt the sector.
J.P. Morgan analysts scrutinized ZIM stock, which was the market’s darling before the drop. In addition,
EGLE, GNK, SBLK, and MATX stocks fell in sympathy to ZIM’s selling pressure.
Hellenic Shipping News cited grain shipments fell when Ukrainian ports closed. China’s lockdown of
Shanghai also hurt shipping volumes. Investors will need to watch the Baltic Exchange’s sea freight index
closely. The BDI has a history of climbing to unsustainable levels only to fall unexpectedly. This time is no
different.
Cargo demand will fluctuate. GDP growth is slowing globally. China will likely revise its GDP sharply
lower to account for its shutdown. Still, the region’s re-opening is a positive catalyst for shipping.
Consumer demand for Chinese goods should stay strong.
Higher commodity costs will weaken demand. Shipping volumes for commodities may fall throughout
2022 and 2023. Related to the shipping rate worries are commodity stocks. Cleveland Cliffs (CLF), Vale
(VALE), and Freeport-McMoRan (FCX) are sensitive to commodity prices. Their weak stock performance
could continue as demand for iron ore falls.
