Playbook #036: Marine Shipping Industry
🖼️ The Big Picture
“God must have been a shipowner. He placed the raw materials far from where they were needed and covered two-thirds of the earth with water.”
-Erling Naess, Norwegian shipowner, 1901-1993
What happens when you have a lot of demand for something, and not enough supply? Prices, and profits, skyrocket. And that’s exactly what has happened in the shipping industry thanks to the supply-chain issues we’ve all been dealing with since the start of the pandemic.
After a rocky initial shutdown due to the pandemic, earnings, dividends, and stock prices have gone absolutely parabolic. Star Bulk (SBLK) is a global shipping company out of Greece whose earnings per share have gone up 36x to $6.22 in 2021, from only $0.17 in 2020.
While some ambitious people see an end to supply chain issues in 2022, this article gives insight into why many industries will likely see both shortages and oversupply issues (from the bullwhip effect) at least through this year.
There simply aren’t enough container ships to handle the demand. They’re working to build new container fleets, but most of that new capacity won’t be ready until 2023 at the earliest. Plus they need more investment in infrastructure like ports, roads, and bridges.
All of these things take time, and large delays aren’t exactly uncommon. This opens up the door of opportunity to invest in marine finance projects, shipping stocks (especially dividend-paying), ETFs, and even shipping vessel projects. This is a very real-world, practical problem that’s contributing to inflation and has no easy, quick solutions. If you’re interested in funding the solution and potentially making some strong returns along the way, then keep reading.
🔢 By The Numbers
- 1.9 billion - how many tons of materials, commodities, and supplies are moved in shipping containers by sea each year.
- 20% - how much longer a typical container spends in transit compared to before the pandemic.
- $1,500 - how much it cost to ship a 40’ shipping container from China to the U.S. West Coast prior to the pandemic. Rates went over $20,000 in 2021, before dropping to just over $8,000 in 4 days. Prices are dynamic and seasonal and depend on supply and demand.
- 122% - how much annual contract rates are up (as of January 2022) from pre-covid for Asia - U.S. shipping.