Investing.com-- HSBC downgraded major container stocks, forecasting a slowdown in earnings especially after disruptions from a short-lived U.S. east coast strike turned out to be less dire than expected.
The brokerage noted that while shipping had “thrived amid the chaos of 2024,” disruptions in the Red Sea (NYSE:SE) were now unlikely to create any more pressure, and that the U.S. strike no longer presented a threat.
This trend is expected to see shipping supply overshoot demand sharply in 2025-2026, and that pure-play shipping operators were likely to see increased earnings pressure from lower freight rates.
HSBC downgraded Evergreen Corp (NASDAQ:EVGR) to Hold from Buy, and downgraded COSCO SHIPPING Holdings (HK:1919) and Orient Overseas International Ltd (HK:0316) to Reduce from Hold.
The brokerage maintained its Buy rating on Maersk (CSE:MAERSKa), citing improving margins in its logistics business, and also maintained Buy on SITC International Holdings Co Ltd (HK:1308) on strong cost management and shareholder returns.
HSBC maintained its Reduce rating on Hapag Lloyd AG (ETR:HLAG) due to its expensive valuations.
Global shipping rates had surged through 2024 as disruptions and reroutings in the Red Sea, due to Houthi activity, caused backlogs across the globe. A strike in ports along the U.S. east coast was expected to add to this pressure, although dock workers and port operators reached a deal after just three days of strikes.
HSBC noted that any future setbacks could still present an upside for the shipping industry.
But container shipping was likely due for another downcycle, HSBC said, with milder growth in 2025 and a decline in 2026, especially if tensions in the Red Sea abate.