Shipping stocks in Europe and Asia took a significant hit on Friday as the resolution of a US port strike dashed hopes for a short-term rebound in freight charges.
The strike, which began earlier this week, was abruptly ended on Thursday after US dockworkers and port operators reached a tentative deal on wages.
In early trading in Europe, Denmark’s A.P. Moller-Maersk dropped 7.7%, making it one of the worst performers on the STOXX 600 index.
German shipping giant Hapag-Lloyd suffered an even steeper fall, plunging 12.4%.
Switzerland’s Kuehne und Nagel, another major player in the shipping sector, experienced a smaller but still significant drop of 1.8%.
The impact was also felt in Asian markets, where Taiwan-based Evergreen Marine, Wan Hai Lines, and Yang Ming Marine saw their shares tumble between 8.8% and 10%, marking their biggest single-day losses in months.
In Japan, major shipping companies Nippon Yusen, Kawasaki Kisen, and Mitsui OSK Lines logged drops ranging from 7% to 9%, making them the largest decliners on the Topix index.
Market reaction fueled by downward trend in freight charges
The sell-off was triggered as investors, who had anticipated a temporary boost in freight rates due to the US supply chain disruptions, quickly exited their positions as it became clear the strike’s resolution would restore normal port operations sooner than expected.
Freight rates, which have been under pressure due to excess shipping capacity and easing demand, were expected to see a temporary surge if the US port strike had lasted longer.
However, with the labor dispute resolved earlier than expected, those expectations were dashed, leading to significant sell-offs in the sector.
Yang Ji-hwan, an analyst at Daishin Securities, told Reuters,
Investors who hoped for a short-term rebound in freight charges, which are in a downward trend, are selling as the strike ended.
As normal port operations resume in the US, the shipping industry is left grappling with the ongoing challenges of a weakening freight market, leaving investors uncertain about the near-term outlook for shipping stocks.
Dockworkers and port operators strike deal on wages
The labour dispute was resolved when the International Longshoremen’s Association (ILA) and the United States Maritime Alliance reached a tentative agreement on wages.
The parties also extended their existing contract through January 15, 2025, to allow further time for negotiating a new, comprehensive agreement.
The strike had involved around 50,000 of the union’s 85,000 members, and despite its short duration, it caused significant disruption to US supply chains.
In a joint statement, the ILA and the United States Maritime Alliance announced the wage agreement and contract extension, saying,
The International Longshoremen’s Association and the United States Maritime Alliance, Ltd. have reached a tentative agreement on wages and have agreed to extend the Master Contract until January 15, 2025, to return to the bargaining table to negotiate all other outstanding issues.
Billions of dollars in goods, including essential items such as fruits, pharmaceuticals, and automobiles, had been held up at ports or anchored offshore, waiting for a resolution.
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