2024-01-28 04:11:26 ET
Summary
- Western container shipping companies have stopped coverage of the Red Sea following Houthi attacks in the region.
- Global Ship Lease's stock price has risen since the crisis began, but as most of its contracts are fixed, it should not improve its 2024 EPS.
- GSL's profit potential may be partially improved due to the Red Sea issue, but that hardly offsets long-term income risks associated with its aged fleet.
- The sharp increase in orders for large vessels indicates the container shortage should end in the coming years, likely creating competitive issues for GSL due to its smaller and older fleet.
- GSL's valuation is extremely low, but it's not necessarily likely to deliver more in discounted cash flows than its current market capitalization over the coming years.
The shipping industry is likely one of the most exposed to changes in geopolitical and macroeconomic circumstances worldwide. Since the Russia-Ukraine war began, shipping abilities from the Black Sea and now the Red Sea have become highly challenging. In recent weeks, virtually all western container shipping companies have stopped coverage of the Red Sea, with many dry bulk and container firms following suit . The main exception is a small number of Chinese-operated container shipping carriers that have increased shipping through the Red Sea due to the large increase in charter rates and supposed safety for Chinese vessels....
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Global Ship Lease: Red Sea Crisis Unlikely To Significantly Boost Profits