Daily Brief - Chaos at the Port

TLDR: The unfortunate collapse of Baltimore's Francis Scott Key Bridge, caused by a collision with a container ship, has swiftly brought to the forefront pressing inquiries regarding the economic repercussions of this incident.

Amid a period of already heightened tensions in global logistics due to challenges like the droughts impacting the Panama Canal and conflicts in the Red Sea, this incident threatens to deepen existing logistical hurdles, potentially triggering a series of economic repercussions.

The Port of Baltimore stands as a crucial hub within the U.S. logistics and transportation framework, significantly contributing to the country's economic vitality. In 2023, it set a new record by processing 52.3 million tons of foreign cargo, valued at $80 billion. This cargo included over 847,000 automobiles and light trucks, alongside 1.3 million tons of agricultural and construction machinery.

Leading car manufacturers, including General Motors and Ford, have started to redirect their shipments to alternative ports. However, the overall effect of this incident, particularly on exports, has yet to be fully determined.

Experts in logistics and analysis predict a shift in cargo flows to other ports along the east coast in an effort to lessen the disruption's impact.

Nonetheless, this diversion is likely to cause congestion and delays at these ports, reminiscent of the supply chain difficulties experienced during the Covid-19 pandemic. The anticipated increase in cargo volumes is also expected to elevate shipping and logistics costs, impacting businesses and consumers alike.

The stock of A.P. Moeller Maersk, the Danish shipping company, fell by 5% on Tuesday after announcing its involvement in the collision. This event adds to a ~33% decline in Maersk's stock value since the start of the year.

Market Movers: When Maersk drops:

Here is the historical 1-month response from Maersk peers when its stock falls 5% in 1 day:

1. Hapag Lloyd: 3.75%
2. Maersk: 2.51%
3. Evergreen Marine: 1.25%
4. Yang Ming Marine Transport: 1.11% 5 .Cosco Shipping Holdings 'H': 0.00%
5. MITSUI OSK LINES LTD: -0.33%
6. NIPPON YUSEN KK: -1.34%
7. KAWASAKI KISEN KAISHA LTD: -1.45%
8. ZIM Integrated Shipping Services: -3.58%

Asset Spotlight: Hapag Llyod MACD at historic lows

In the last 4 occasions where Hapag Lloyd's 10D, 200D MAC was at historical lows, analysis from Toggle indicates a median increase in the stock's price over the next 6 months.

Post COVID, Hapag-Lloyd and other shipping firms recorded significant net profits from the latter half of 2020 through 2021, due to the surge in freight rates, a result of the imbalance between the demand for shipping and the available supply.

Earnings Update: Speaking of ships

Carnival Corporation, (NYSE:CCL) is poised to unveil its financial results for the first quarter of FY 2024, ahead of today's trading session. The anticipated financials are expected to reflect the positive impacts of robust demand for travel, increased occupancy rates, and higher ticket prices contributing to the company's growth.

Nevertheless, challenges such as the alteration and cancellation of specific voyages, especially around the Red Sea area, might pose obstacles to its financial performance, potentially affecting its profitability.

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.