2023-12-31 10:57:44 ET
ZIM Integrated (NYSE: ZIM) stock price will be in the spotlight this week as investors focus on the embattled shipping industry. The shares ended the year at $10, about 56% above the lowest level in 2023. Despite the rebound, the stock had one of its worst years on record as shipping rates fell and global demand eased.
ZIM Integrated’s great reset was expected since the company, together with its peers like Maersk and MSC Shipping, had a great performance during the pandemic. At the time, there was substantial demand, which pushed global shipping rates to their highest level on record.
As a result, ZIM generated strong revenues and profits and then rewarded its shareholders with strong profits. Recently, however, the global economy has slowed, shipping demand has eased, and ZIM is losing substantial amounts of money. A dividend drought has ensued.
Still, there are some positive catalysts for ZIM, even though I don’t expect it to move to its pandemic levels. There are signs that global demand is picking up as the Chinese economy recovers. Recent data shows that its industrial production and retail sales rose.
Most foreign investors take Chinese economic numbers with a grain of salt. Still, other indications are that the economy is picking up. As I wrote recently, iron ore and copper prices have bounced back recently.
Meanwhile, shipping costs are expecting to either rise or normalize this year. The most recent data shows that the Drewry’s World Container Shipping Index has risen to $1,661, up from the year-to-date low of $1,340.
This trend could continue as the Houthi attacks in the Red Sea continues. In a statement, Maersk, the second-biggest company in the industry, said that it will delay transits in the Red Sea for 48 hours after a container ship was attacked.
The other catalyst for higher shipping prices is in the Panama Canal, which is going through seismic challenges, partly because of climate change. As a result, ships are spending more time in the region or embracing longer routes.
To be clear. These events also have cons for companies like ZIM since they also increase shipping costs now that energy prices are also substantial. The company also has substantial debts, which could put its recovery at risk.
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