Think For Yourself.
In my unlinked "Investor" account, $ZIM recently became my largest holding, overtaking a DCAing QQQM. Since 2021, I have enjoyed holding ZIM through the volatility (CC's & CSP's) and collecting the generous dividends ($22.35/sh to date; 45.8% yield).
Watching ZIM the past few weeks has been... less fun.
I even thought about selling my remaining shares for a small loss.
...decided to go for a walk instead and think about things.
WHAT HAPPENED??
In the chart below, I have annotated major price action events with possible explanations. I believe a lot of the movement is related to the $17/sh dividend paid in April. It is important to note that I use the term "snatchers" in the most endearing way possible.
The other important timeframe noted on the chart is the historically busy shipping season (June - Oct) prior to the United States holidays. In 2021, a significant share price increase occurred during this time. I expect a similar response in 2022; perhaps more muted due to the reasons discussed below, but still upward.
The event responsible for the most recent price drop is a Freightwaves article released on June 7th: "US import demand is dropping off a cliff".
The article, makes the following points:
- Imbalanced inventory -> $TGT self-reported inventory issues used as evidence
- Consumer demand hurt by inflation
- No evidence (yet) of expected surge of shipments from Shanghai after COVID reopening
On that 3rd point, I thought the data below was interesting as it shows Shanghai booking volumes (red) dip during the lockdown and a corresponding volume increase at Ningbo (yellow; closest alternative port to Shanghai). Instead of waiting in Shanghai and contributing to the "backlog", the shipments were simply re-routed through Ningbo thereby avoiding the surge of shipments upon Shanghai reopening.
From the same article, the data below shows both decreasing container volumes and spot prices for ocean freight (China to United States).
- Decreasing volume & decreasing prices (= less $$ for ZIM).
Before this last point, I need to emphasize again how amazing 2021 was for ZIM (below).
For me, the buried headline in this bearish article is that the "low" 2022 spot rates above are 73% or 59% HIGHER than 2021's rates (YoY; for West or East coast ports, respectively).
This all seems like an over-reaction to me.
Might be the 1st time the market has done that, right?
Glad I went for that walk.
Still holding ZIM.
Looking forward to the holiday season.
I had a meeting last week with a senior team from a major Shipping and Logistics company and they are all but certain that shipping rates will never revert to pre-May ‘21 levels. As they put it, Shipping companies have ‘smelled blood in the water’ and they are positioning themselves for higher price bases for the future, consumers and suppliers alike will have to adjust to the new normal. Our cost of shipping from Saudi to the USA increased by 10% last month and since Q4 2019, the shipping price index we use for price escalation purposes has increased by 545%, the majority of those increases happened in the last 12-18 months.
With new shipping fuel rules (IMO 2020) yet to really come into play, this situation is going to continue; as more ships are retired or refitted shipping constraints will be an inevitability.
