Shipping Bottlenecks Could Last Well Into 2022. That's Good News For Investors

Shipping Bottlenecks Could Last Well Into 2022. That’s Good News for Investors

You’ve probably heard this already, but if you haven’t started your Christmas shopping, it might be a good idea to do so as soon as possible. Shipping bottlenecks are expected to persist well into 2022, driven by slow capacity growth, a shortage of containers and truckers, and the ongoing semiconductor chip crunch, which has limited new truck production for last-mile delivery.

These “perfect storm” disruptions have created numerous headaches for shipping and logistics companies. But as is often the case, bad news is good news, especially for investors who have seen shares of container lines surge in the 18 months since the pandemic began.

A.P. Moller-Maersk, the world’s largest carrier, has sailed up close to 190% in Copenhagen trading. In September, Bloomberg analysts forecast that Maersk’s 2021 net income will end up somewhere in the neighborhood of $16 billion, which would be a record for not just the company but for any Denmark-listed company. (Danish pharmaceutical company Novo Nordisk holds the current record after having reported over $6.5 billion in profits in 2020.)

Maersk's Profit

This is all thanks, of course, to unheard-of shipping rates. The Freightos Baltic Index, which measures global container prices, currently stands at an average $10,321 per 40-foot container. A year ago, the same container cost exporters only $2,231, or about four-and-a-half times less, to ship. To send just one container from Shanghai to Los Angeles, companies must now cough up a jaw-dropping $17,478, according to Freightos.

Containers Shipping Rates Remain Elevated

Looking at the chart above, you probably notice that rates are rolling over, and so you may infer that the market is in the process of normalizing. As much as that would provide consumers with some relief, we could be looking at several more months of global supply chain disruptions.

Morgan Stanley: Higher for Longer

That’s according to research by Morgan Stanley, which said in a report last week that “the market may stay peaked for longer.” The investment bank expects shipping revenues to stay elevated at least through the second quarter of 2022. Quarterly earnings, then, may not have peaked yet, leaving plenty of upside potential for investors who seek to participate.

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Disclosure: The Freightos Baltic Daily Index measures the daily price movements of 40-foot containers in 12 major maritime lanes. It is expressed as an average price per 40-foot ...

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