(BFM Bourse) – Shares in Denmark’s Maersk and Germany’s Hapag-Lloyd are on a sell-off this Wednesday as Maersk plans to sail through the Red Sea again and CMA CGM could take more ships through the Suez Canal.
After significant progress in the stock market in recent weeks, the prices of listed shipping companies fell sharply this Wednesday. In Copenhagen, Danish sector giant Maersk lost 4.6%, while in Frankfurt, Germany’s Hapag-Lloyd lost 5.1% by late morning.
These declines are akin to profit-taking, while both stocks have seen corresponding gains of more than 10% and more than 30% since the start of the Red Sea attacks, sending their shares higher, with the market anticipating an increase in shipping rates and therefore their prices .
The decline seen this Wednesday may be supported by statements from several heavyweights in the sector who have announced that they want to increase the number of ships passing through the Red Sea (and by extension the Suez Canal) after previously suspending their operations in the area.
>> Get access to our exclusive graphical analyzes and gain insight into the trading portfolio
“Operation Guardian of Prosperity”
In a statement on Sunday, Maersk said it was “preparing” to allow its ships to resume Red Sea transit, both east and west. This decision follows the creation of an initiative called “Operation Prosperity Guardian”. The mission, launched by an international coalition led by the United States, aims to guarantee the safety of commercial ships in the Red Sea, an artery where the equivalent of about 12% of world trade circulates, according to the Guardian. This was in response to attacks on ships carried out by Yemen’s Houthis, an armed rebel faction.
“We are currently working on plans for the first ships to make the transit and to do so as soon as it is operationally possible,” Maersk added.
France’s CMA CGM (undisclosed) said it planned to “gradually increase” the transit of its ships through the Suez Canal, while some ships transited the Red Sea following an “in-depth assessment of the security situation.” “We are constantly monitoring the situation and are ready to reassess and adjust our plans if necessary,” he added, quoted by Reuters.
Increase in shipping rates
A potential resumption of traffic by major Red Sea shipowners may lead investors to expect a smaller increase in shipping rates.
As we explained in a previous article, the disruption caused by Houthi attacks in the region led the market to expect an increase in sea freight rates (but also air freight). This is because the impassability of the Red Sea means that ships go around the Cape of Good Hope in southern Africa to connect Europe with Asia. This adds approximately 10 days to the return journey and can therefore increase costs while reducing the supply of available ships.
Shipowners’ measures have therefore advanced significantly since mid-December and the beginning of the incidents in the Red Sea. The Solactive Global Shipment Index, which aggregates the stock market performance of 47 listed shipping groups, rose from 156.93 points on December 13 to around 180 points today, an increase of nearly 15%.
Julien Marion – ©2023 BFM Bourse