With the intensification of global recession expectations, the war in Russia and Ukraine, and inflation, the post-pandemic market will no longer be the pre-pandemic market. What awaits the shareholders of COSCO SHIPPING may not be surprises and uncertainties, but an abyss of despair.
If you look at the financial reports of the past ten years, you can find that the shipping industry has always been a tough industry, and it is very general in terms of return on capital, profitability and value. In the global trade market, it is a “player”. In the past few years after the epidemic, it has made a lot of money and enjoyed the highlight moment in the 66-year history of shipping. With the huge increase in transportation capacity, the imbalance of supply will be greatly reduced. In the next 5-10 years, the supply will be greatly exceeded or even greatly exceeded.
Next, I will add seven points of my views on the shipping market. Rational discussions and exchanges are welcome:
1. The last time U.S. inflation was so high was in the 1980s, and two of them were to blame, shipping and oil. The American cargo owner even complained directly to the White House that the container shipping fee for 20 years was $3,500, and in October 2021, the shipping fee soared to $2w-3w, calling him a good guy. If the oil industry earns more than God, then the shipping company earns more than God, Allah and Buddha together. (A certain TV once directly named it. TV in the shipping industry is not a good sign. Sure enough, the freight rate began to go down. Last year, the freight rate of the US line rushed to 30,000 US dollars. As of 9-02 in this issue, the freight rate in the US and West has plummeted by 5.4%. to 2232.89)
2. The CEO of Maersk said that the container volume in the second half of this year will decline, and it will be hit hard as early as August, because the factors that cause the container boom due to the epidemic may soon reverse. You may be very interested in the profit balance point of the shipping company, that is, the company’s transportation cost. The cost of each container on the European and American routes is roughly in the range of 1500-2500 US dollars (especially the mainstream shipping companies). Thinking back to 2016, there were more than 1,000 U.S. lines and hundreds of dollars in shipping costs in Europe. During that time, it was really hard to vomit blood, and many companies did not survive, such as: UASC, Hanjin.
3. The “speculation” is unsustainable, and the market is no longer hot. Inflation sweeping the world, and the global recession at any time, the supply chain is experiencing a bullwhip effect. Inflation and recession are causing consumers to lower expectations and cut spending, and reduce expectations for an economic recovery. All of this will have a huge impact on trade and transport. The sluggish demand, along with the newly added shipping capacity in the shipping market, statistics show that the current orders for new container ships have exceeded 1,000, with a total capacity of more than 7 million TEUs, which will be launched in the next 2-3 years. What are you doing? It is the fourth, fifth, and sixth largest shipping company, the sum of the three shipping capacity (COSCO, Hapag-Lloyd, Evergreen), no surprise, no surprise? It may be that we are too confident in this industry, thinking that we can jump out of the Three Realms, realize the Tao, and not be affected by the cycle that has been traced for half a century.
4. The French-style local tyrants and landlords, the shipping company CMA CGM took the lead in reducing freight rates for the country, and shared prosperity with the French people and contributed to the economy. This alternative price reduction (CMA CGM only offers discounts to domestic cargo owners) has brought a head to the shipping company. France has CMA CGM, why doesn’t Germany have Hapag-Lloyd and China does not have COSCO? Korea does not have Han Xin, Japan does not have one? Patriotism is a good thing, but I also love my country very much. There are many ways to be patriotic, such as donating money, buying government bonds, and increasing dividends. I think COSCO’s recent sharp increase in the dividend ratio is also due to this pressure. Therefore, in order to protect their homeland, the United States will introduce a new shipping bill, South Korea requires shipping companies to open additional routes, and even India, Thailand and Vietnam all claim to set up their own liners. These are all new shipping capacity and are bad for future shipping costs . After running for decades, suddenly becoming the protagonist, it really makes people think of the bitter past.
5. In the first half of the year, while the shipping company’s beautiful financial report, the overall shipping volume fell, the profit soared, and the shrinkage increased. The issue of the strike at the US West Wharf is still pending, and the labor and management parties have not yet reached an agreement. Strikes at European ports. The overall outlook for the shipping market is not optimistic.
6. For 12 consecutive weeks, the container shipping market continued to decline unilaterally, and the shipping company’s suspension of sailing to save the market was ineffective. The cargo owner shouted that the feng shui took turns, last year Hedong, this year Hexi. However, it seems that the freight has not yet fallen in place. From the past experience, the freight has risen sharply and slowly decreased. Last year, the fastest increase in a single week could rise by 1-2k, and now the decline is basically a few hundred dollars a week. From the perspective of the broader market, the current freight rate is still at a high level, and it cannot be compared with the same period last year, because it rose from a low level 20 years ago. In investment terms, the current decline is floating profit. But most importantly, the market has no basis to support high shipping rates. The good news is that shipping companies have not competed aggressively in the market because of performance pressure. The market is very cruel. If Europe can spend the winter in the next, it will not be the worst.
7. Will the collapse of the shipping market in 2009 be repeated? Judging from the existing data, the market has reversed sharply. We once believed that the hope that the shipping market may re-prosper has been close to fantasy. The goods are gone, the demand is gone, and disaster is coming. To study the problems facing the global shipping market, we can look at it from a different perspective. From the impacted industries such as tourism, real estate, and catering, inflation that our generation may have never seen before, the war in Europe, and the Asia-Pacific crisis are all hanging in the balance. Sword of Darkmus.
To sum up, the collapse of the shipping market may not be unfounded. What do you think? ? ?
The international practice of cyclical stocks is generally to add up 20 years of profits and allocate them to each year, and adjust the valuation according to expectations. As for how much you earn now, it is not worth mentioning in the cycle. .
Peter Lynch once said: “The best time to enter a cyclical stock is in a recession or the bottom of an economic cycle, when company earnings have hit rock bottom and public sentiment is at its most pessimistic.
High profits and high prosperity are accompanied by high risks. $COSCO SHIPPING Holdings(SH601919)$ $COSCO SHIPPING Holdings(01919)$ $Orient Overseas International(00316)$ @Today’s topic @snowball research group
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