The upcycle in container shipping is stronger than expected, with 2Q-3Q margins likely to improve

Overview

This report summarizes a discussion hosted by HSBC with Linerlytica on June 25, 2026 regarding the outlook for container shipping. The core view is that the industry's upcycle is stronger than expected and may last longer, with short-term freight rates, effective capacity, and demand mix jointly supporting margin improvement in 2Q-3Q; however, the medium-term peak in vessel deliveries and the return of Red Sea capacity remain the main uncertainties.

Core views

First, market strength may persist at least through August, and possibly into September, rather than falling back quickly after an early peak. Second, demand sources are more structural, coming from AI/data centers, clean technology, power infrastructure, EVs, batteries, and solar, rather than purely consumer front-loading. Third, short-term supply tightness, port congestion, and rerouting support freight rates; however, a reopening of the Red Sea could release around 6% capacity. Fourth, earnings leverage improves in 2Q-3Q, making upward revisions to FY26 guidance by Maersk and Hapag Lloyd feasible. Fifth, the peak of new vessel deliveries in 2027-2028 could increase medium-term freight rate volatility again.

Analysis framework

The report is based on information from the Linerlytica webinar, combined with spot freight rates by route, regional volumes, effective capacity, Red Sea rerouting, fuel and operating costs, CCFI increases, fleet orderbooks and scrapping capacity, as well as HSBC's P/B valuation and rating framework for covered shipping companies, to form judgments on short-term industry conditions and stock positioning.

Methodology notes

• Supply-Demand AnalysisEffective Capacity and Demand Growth Framework

  Compare the effects of demand growth, nominal supply growth, congestion, rerouting, and Red Sea reopening on available capacity.

  Linerlytica expects demand growth of 6-7% in 2026 and supply growth of about 5%; if the Red Sea reopens to transit, around 6% capacity could be released and lead to freight rate correction, so short-term tightness and medium-term supply pressure need to be assessed separately.

• Valuation methodsPrice-to-Book (P/B) Multiple Method

  Apply a target P/B multiple to 2026e BVPS, with adjustments for dividends, buybacks, FX, or ESG premium.

  Target prices for Maersk, Evergreen Marine, COSCO Shipping, OOIL, SITC, and Hapag Lloyd are mainly based on P/B multiples; the multiples used differ by company relative to historical averages, standard deviations, and ESG positioning.

• RatingHSBC Equity Rating Bands

  Upside or downside of the target price versus the current share price is used to support Buy, Hold, or Reduce ratings.

  HSBC's disclosed framework shows that a target price more than 20% above the current price typically corresponds to Buy, around plus or minus 5% typically corresponds to Hold, and more than 20% below the current price typically corresponds to Reduce; this report assigns different ratings to multiple container shipping stocks.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AP Moller Maersk (MAERSKB DC)

  One of the core recommendations, rated Buy

  Strengths

  Target price of DKK19,000 implies +18.3% upside from the current price of DKK16,060; a delayed resumption of Red Sea transit benefits the ocean business, while stable terminals, recovering logistics margins, and ongoing buybacks provide downside protection.

  Weaknesses

  Cost pressure is rising, and ocean profits may gradually normalize as vessel deliveries proceed and disruptions normalize.

  Comparison

  Valuation uses 0.72x 2026e P/B plus a 5% ESG premium; versus some peers, Maersk has stronger ESG positioning and greater business diversification.

  Risks

  Rapid release of Red Sea capacity, rising fuel costs, execution risk from major M&A, and additional costs from the USTR port fee proposal.

• Evergreen Marine (2603 TT)

  One of the core recommendations, rated Buy

  Strengths

  Target price of TWD255.00 implies +36.7% upside from the current price of TWD186.50; continued spot freight rate increases directly support share price momentum.

  Weaknesses

  No ESG premium is assigned, and valuation and earnings remain highly dependent on the persistence of freight rate disruptions.

  Comparison

  Uses 0.9x 2026e P/B, roughly equal to the average since mid-2011; it offers the highest implied upside among covered names.

  Risks

  Intensifying competition, trade growth below expectations, rising fuel prices, stronger protectionism, and supply pressure in 2027-2028.

• COSCO Shipping-H (1919 HK) / COSCO Shipping-A (601919 CH)

  One of the core recommendations, rated Buy

  Strengths

  H-share target price of HKD17.20 implies +29.5% upside; A-share target price of RMB18.50 implies +32.1% upside; valuation is supported by improved near-term earnings trajectory, clearer industry structure, and a 50% payout framework for 2026-2028e.

  Weaknesses

  Sensitive to global trade, policy tariffs, Chinese exports, and industry freight rate volatility.

  Comparison

  H shares use 0.93x 2026 P/B, while the A-share target price is derived from the A-H premium; dividend yield is relatively attractive in the coverage table.

  Risks

  Slower trade growth, regulatory limits on market-based pricing, rising fuel costs, and freight rate declines if Red Sea disruptions are resolved too quickly.

• SITC (1308 HK)

  Rated Hold

  Strengths

  The company has good pricing power and a low-cost base, with a current price of HKD31.70 and a target price of HKD31.00, implying -2.2% downside.

  Weaknesses

  Current valuation is viewed as relatively fair, with 2026e P/B at about 4.0x, already reflecting strong ROE and regional advantages.

  Comparison

  Compared with global long-haul container shipping companies, SITC is more focused on Asian regional routes, with a clearly higher valuation multiple but also a higher dividend yield.

  Risks

  Mainland China's economic development coming in below expectations, slower Asian regional trade, rising fuel prices, stronger protectionism, and U.S. reciprocal tariffs affecting intra-Asia trade more than expected.

• OOIL (316 HK)

  Rated Hold

  Strengths

  Target price of HKD130.00 implies +7.3% upside from the current price of HKD121.10; current disruptions and congestion may sustain near-term freight rates.

  Weaknesses

  Its ESG positioning is viewed as neutral relative to peers, target price upside is limited, and the rating remains Hold.

  Comparison

  Uses 0.70x 2026e P/B, about equal to the average since mid-2011; compared with Buy-rated names, upside is more limited.

  Risks

  Congestion and supply chain inefficiencies lasting for a shorter time than expected, freight rate gains weaker than expected, global ex-U.S. consumer demand weaker than expected, and U.S. retail consumption weaker than expected.

• Hapag Lloyd (HLAG GY)

  Rated Reduce

  Strengths

  The company remains one of the major global container shipping peers, with strong ESG positioning supporting a 5% ESG premium assumption.

  Weaknesses

  Target price of EUR90.00 implies -22.3% downside from the current price of EUR115.90; HSBC believes high fuel prices could weigh on margins and the share price.

  Comparison

  2026e P/B is about 1.2x and 2026e ROE is -2.6%, implying weaker risk-reward relative to covered peers; Linerlytica also noted that Gemini Cooperation has underperformed due to contract exposure, spot discounts, and hub-and-spoke costs.

  Risks

  Persistently high fuel costs, freight rate pullback, alliance efficiency below expectations, and supply growth exceeding demand in 2027-2028.

Key data

• Report Date2026-06-26Market data is generally as of the close on June 24, 2026.
• Webinar Date2026-06-25HSBC invited Linerlytica to discuss the container shipping outlook.
• Transpacific Freight RatesUSWC cUSD6,000/40ft；USEC cUSD7,000-8,000/40ftSpot freight rates were still rising as of late June, with carriers pushing for July increases.
• Regional Volume PerformanceTranspacific about +4-5% y-o-y；Africa YTD about +50%；Latin America about +12%Demand is not concentrated in a single region, and emerging markets are absorbing part of the capacity.
• 2026 Supply-Demand ViewDemand +6-7%；Supply about +5%Short-term effective capacity remains tight, but a Red Sea reopening could release around 6% capacity.
• Earnings ElasticityCCFI about +40-42%；industry EBIT margin may rise from about 5% in 1Q to about 10% in 2QFuel costs are about 30% higher than before the conflict, but operating costs are expected to rise only about 2-3%.
• AP Moller MaerskRating Buy；Current price DKK16,060；Target price DKK19,000；Upside +18.3%The target price is based on 0.72x 2026e P/B, with a 5% ESG premium and buyback adjustment added.
• Evergreen MarineRating Buy；Current price TWD186.50；Target price TWD255.00；Upside +36.7%Benefiting from spot freight rate momentum driven by disruptions.
• COSCO Shipping-H/AH shares upside +29.5%；A shares upside +32.1%；both rated BuyValuation is supported by improved near-term earnings trajectory, better industry structure, and a 50% payout framework for 2026-2028e.
• Hapag LloydRating Reduce；Current price EUR115.90；Target price EUR90.00；Downside -22.3%HSBC believes high fuel prices could weigh on margins and the share price.

Impact & implications

In the short term, there is room for upward revision in margins and earnings expectations for the container shipping sector, with companies offering spot freight rate exposure, cost control, and shareholder return support likely to benefit more; however, the investment conclusion is not broadly bullish, as high valuations, fuel pressure, changes in alliance competition, and the medium-term peak in new vessel deliveries will constrain the risk-reward of some names.

Risks

• If the Red Sea issue is resolved faster than expected, around 6% capacity could be released and trigger a freight rate pullback.
• New vessel deliveries accelerate from 2H27 into 2028, with supply growth in 2028 potentially around 14%, while limited scrapping capacity keeps net supply pressure high.
• Trade growth may come in below expectations, especially if U.S. retail consumption, global ex-U.S. consumer demand, and China-related exports weaken.
• Rising fuel prices or a wider VLSFO-HSFO spread could erode margins.
• Regulatory scrutiny, protectionism, tariff changes, and the USTR port fee proposal could disrupt trade flows and costs.
• Intensifying competition or changes in alliance strategy could weaken carriers' pricing power.

What to watch

• Whether freight rate increases in July and August can be implemented, and whether USWC/USEC spot freight rates remain elevated.
• The timing and scale of Red Sea route reopening and the actual release of effective capacity.
• Changes in the gap among CCFI, SCFI, charter rates, and spot freight rates.
• Whether industry EBIT margin in 2Q and 3Q rises from about 5% in 1Q to about 10% or higher.
• Whether Maersk and Hapag Lloyd raise FY26 guidance.
• Whether cargo flows related to AI/data centers, clean technology, EVs, batteries, and solar continue to support demand.
• The pace of order deliveries, scrapping volume, and actual supply growth in 2027-2028.