Source: Gelonghui

Today, European freight carriers continued to rise high. At one point, they rose more than 13% in the intraday session. By the close of early trading, they had risen 11.93%, breaking through 3,900 points and continuing to reach new highs. Since April, the total increase of the main European shipping network has exceeded 110%.

The 2408 contract and 2410 contract rose more than 15% and 18% respectively, both to record highs.

The shipping concept in the A-share market has also been exploited. The shipping index has accumulated a cumulative increase of more than 34% since its low in February this year.

On individual shipping stocks, as of press release, A shares$Ningbo Ocean Shipping (601022.SH)$,$Phoenix Shipping (000520.SZ)$An increase of about 10%,$COSCO Shipping Energy Transportation (600026.SH)$,$COSCO Shipping Holdings (601919.SH)$An increase of nearly 5%,$China Merchants Energy Shipping (601872.SH)$,$COSCO SHIPPING Development (601866.SH)$Wait, the increase was the highest.

Hong Kong stocks$LC LOGISTICS (02490.HK)$An increase of more than 9%,$COSCO SHIP HOLD (01919.HK)$An increase of more than 6%,$COSCO SHIP ENGY (01138.HK)$,$SINOTRANS (00598.HK)$,$OOIL (00316.HK)$,$CHINA MER PORT (00144.HK)$etc., followed suit one after another.

Why did European freight continue to reach new highs?

Last week, shipping routes experienced a sharp rise across the board. Among them, SCFI (Shanghai Export Container Freight Index) surged 18.8%, while European/Mediterranean/American/Western/Eastern American routes rose 24.7%/21.0%/22.0%/19.3%, respectively.

This is mainly due to the positive demand for international trade. Both the retail sales growth rate in the US and the manufacturing PMI trend in major emerging countries are in an upward phase. This provides strong demand support for the shipping market and has driven up European futures prices in the shipping index.

On the other hand, the continuing tension in the Red Sea is also an important factor in the recent sharp rise in the consolidation of European route futures.

On May 9, local time, a Yemeni Houthi spokesman said that the Houthis attacked several ships linked to Israel. Targets include the “Diego” and “Gina” in the Gulf of Aden. The group also carried out two attacks on the “Victoria” in the Indian Ocean and the Arabian Sea, respectively.

Worse still, the failure of the peace talks between Palestine and Israel in Cairo meant that the resolution of the Red Sea crisis was far away. Many shipping companies, including Maersk, will choose to avoid the Suez Canal bypass route to the Cape of Good Hope for a long time to avoid attacks on Red Sea ships by the Houthis in Yemen.

This has undoubtedly increased the complexity and risk of transportation, leading to higher transportation costs. According to reports, the revenue of the Suez Canal Authority fell to 575.1 million US dollars in April this year, down 36.5% from 904.5 million US dollars in the same period last year. Additionally, Maersk issued an announcement stating that the Red Sea crisis will cause a 15-20% loss in ship efficiency in the second quarter.

Despite the recent rapid rise in European fares, due to tight markets and adjustments in shipping companies' strategies, it is difficult to book a class even when paying high freight rates. Freight rates on South American routes have soared even more, especially on South American East routes. Some freight rates have already broken through the 10,000 US dollar mark.

Are freight rates expected to rise further?

According to the Guoxin Securities Research Report, the impact of the current Red Sea conflict continues. European and American retail inventory replenishment has led to a recovery in industry demand. Some European ports began to be blocked this week. Similar to the supply chain disorder in 2021, once major main routes begin to be delayed, it will siphon the capacity of other routes. If congestion cannot be resolved, freight rates are expected to exceed expectations once again. On the other hand, the current fluctuation in freight rates shows that the industry's capacity is already tight. As industry supply enters a gap period in 2024-2025, the supply and demand pattern is expected to continue to improve.

At present, SCFI has risen to more than 2,300 points, and several liner companies have once again issued price increase notices in mid-late May, which has played a certain supporting role in the market. Chen Yuhao, a futures shipping researcher at CITIC Construction Investment, believes that with reference to the freight level of the second round of price increases that came into effect in mid-May, the underlying index will continue to rise on May 20 and 27. Under a conservative tone, it may enter the 2,700 to 2,900 range, and there is even a possibility that it will break through the 3,000 point level.

He further pointed out that even if the increase in the announcement cannot be fully realized, the focus of freight rates in May will be steady, moderate, and strong, eventually driving up freight rates in June, July, and August. If the volume of goods is sufficient, there may also be two or more rounds of mid-month price increases in June, July, and August.

In terms of shipping companies' performance, according to Wind statistics, out of 19 shipping companies, 17 achieved profits in the first quarter of 2024; among them, companies such as COSCO Maritime Control, China Merchants Shipping, and COSCO Haineng ranked high in terms of performance growth.

Based on this, Huatai Securities pointed out that the first quarter benefited from a recovery in export demand compounded by repeated geographical conflicts, and profits in the shipping port sector improved. Looking ahead to the second quarter, market freight rates are expected to rise further month-on-month, boosting profit growth over the same period.

List of related concept stocks:

$COSCO SHIP DEV (02866.HK)$ : The company is a state-owned enterprise, and the actual controller is China Ocean Shipping Group. The company has strategically transformed into a leasing business such as ship leasing, container leasing and non-shipping leasing as the core. The scale of the ship leasing business is the world's leading, and the container leasing business is the second largest; in 2017, shipping and related leasing revenue was 10.384 billion yuan, accounting for 61.61% of revenue.

$CIMC (02039.HK)$: The world's leading supplier of logistics equipment and energy equipment, dedicated to containers, road transport vehicles, energy, chemical and food equipment, marine engineering, logistics services, airport equipment and other business fields. It has more than 300 member companies and 2 listed companies in Asia, North America, Europe, Australia, etc., and its customers and sales network are distributed in more than 100 countries and regions around the world.

$COSCO SHIP HOLD (01919.HK)$ : COSCO SHIPPING, a wholly-owned subsidiary, mainly engages in international and domestic maritime container transportation services and related businesses, and has the fourth largest fleet in the world; in '17, container shipping and related business revenue was 86.751 billion yuan, accounting for 95.90% of revenue. The controlling shareholder of the company is China Ocean Shipping Co., Ltd., and the actual controller is the State Council's State-owned Assets Supervision and Administration Commission.

$Phoenix Shipping (000520.SZ)$: Mainly based on coastal bulk transportation into the river; due to a sharp decline in capacity after bankruptcy and restructuring, the market share was low. In 2017, the transportation industry had revenue of 687 million yuan, accounting for 100% of revenue.

$Ningbo Ocean Shipping (601022.SH)$: The company is a comprehensive shipping company, mainly engaged in international, coastal and Yangtze River shipping business, shipping agency business and dry bulk freight forwarding business. The revenue mainly comes from shipping business revenue, dry bulk shipless shipping revenue, and shipping agency business.

$Nanjing Tanker Corporation (601975.SH)$: The only domestic water transport enterprise with international and domestic oil and chemical gas transportation qualifications. The company has international and domestic coastal, middle and lower reaches of the Yangtze River and tributary crude oil, refined oil products, chemicals, gas and other transportation service qualifications. The company has established good cooperative relationships with major international petroleum companies. It has signed long-term high-quality COA contracts with Mobil, CNPC, Sinopec, CNPC, etc., and has a high-quality supply guarantee.

$HNA Technology (600751.SH)$: It mainly operates global dry bulk cargo transportation, and has established cooperative relationships with many large domestic and foreign cargo owners. It has long been engaged in dry bulk transportation in Australia, Brazil, the United States, Canada and Indonesia. The main transportation goods are iron ore, coal, food, steel and bauxite.

editor/tolk