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Shipping Prices Rebounding

Shipping Prices ReboundingShipping Prices Rebounding

The CEO of the world’s largest shipping firm by capacity has given his unique insight into the rebound seen in global shipping prices in the last few months.

Speaking to CNBC Wednesday at the World Economic Forum in Davos, Soren Skou, the chief executive officer of Maersk Group, said the global freight index for container shipping had more than doubled in the last nine months.

“It’s simply driven by the fact that the carriers have taken a lot of capacity out of the market,” he said. “They are losing significant sums of money every day, and continuing to do that is simply not sustainable. Today, about 5% of the global container fleet is actually idle ... That has helped to support prices.”

“We and others were surprised by the fact that global trade was not growing nearly as much as one would have expected five years ago.”

The Baltic Dry Index—traditionally used as a barometer of global shipping—is up around 150% in the last year. Some have speculated that proposed infrastructure spent with the incoming Donald Trump presidency could have buoyed the sector while others suggest traders have weighed into a marker that had seen extreme weakness in recent years.

Meanwhile, one day after a Korean stock exchange official called the shares of Hanjin Shipping Co. “trash,” investors piled in, sending them 15% higher Bloomberg reported.

The company, on the verge of bankruptcy, is a darling of retail investors. Volatility is reaching a record, while the stock was the most-traded on the Kospi index in the past two days.

 “Retail investors are buying the stock so they can make double-digit profits—0% or 20% a day,” said Kim Seung Churl, an analyst at Meritz Securities in Seoul. “The volatility for this kind of company is really high.”

 

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