Peak-Season Prospects for Global Container Shipping Have Improved Sharply: Surging Freight Rates + Release of Suppressed Demand Drive Earnings Growth

Overview

This research report focuses on the global container shipping industry, concluding that the sector’s outlook is rapidly improving, with peak-season earnings forecasts significantly revised upward. Key drivers include soaring freight rates triggered by Middle Eastern geopolitical tensions, ongoing port congestion that tightens effective capacity, and pent-up end-demand being released ahead of the peak season. The report particularly highlights the structural advantages of Asian carriers in terms of their fleet composition and adoption of scrubber technology, enabling them to outperform their global peers in cost management and profitability.

Core views

The report argues that the industry is at a critical inflection point where supply and demand dynamics are turning favorable. On one hand, geopolitical conflicts have directly increased fuel costs and freight rates—the Shanghai Containerized Freight Index (SCFI) has risen by 73% since March, with especially sharp gains on major trade routes. On the other hand, the global port congestion index has reached historic highs, exacerbating operational pressures while also substantially absorbing available capacity, thereby providing structural support to freight rates. Demand remains resilient as well: the U.S. Logistics Manager Index (LMI) stood at 69.5 in May, marking the second-fastest expansion since early 2022; China’s port throughput is accelerating, with April year-on-year growth climbing to 4.8%. Against this backdrop, industry earnings visibility has improved, particularly benefiting Asian carriers with large owned fleets and high scrubber installation rates, whose cost advantages are amplified as fuel price differentials widen.

Analysis framework

The report employs a standard supply-and-demand framework to analyze the shipping industry: first identifying core variables—freight rates (SCFI), capacity (port congestion index, charter rates), and demand (LMI, port throughput, import data); second, treating geopolitical conflicts as a key exogenous shock, tracing their impact on these variables (raising costs → pushing up rates → dampening some demand but tightening capacity constraints); finally, based on differences in carrier microstructures (owned vs. chartered fleets, scrubber configurations), conducting cross-sectional comparisons and assessing relative strengths and weaknesses to identify the most attractive investment opportunities.

Methodology notes

• Supply-and-Demand FrameworkSupply-and-Demand Framework

  The industry’s core lies on the supply side

  The report repeatedly emphasizes that supply-side constraints—such as port congestion, tightness in the charter market, and absorption of effective capacity—are the primary drivers of freight rates and profits, rather than relying solely on demand growth. This reflects an understanding of the cyclical nature of the shipping industry, where supply rigidity often proves more decisive than demand fluctuations.

• Industry/Industrial Analysis FrameworkVolume-price decomposition

  Volume–Price Decomposition

  The report’s analysis of industry performance consistently revolves around two main axes: ‘volume’ (cargo volume, throughput, LMI inventory levels) and ‘price’ (SCFI rates, charter rates, fuel prices), meticulously dissecting their respective trends and interactions—for example, noting that while rates have ‘normalized’ from their peaks, this is due to base effects rather than weakening demand.

• Industry/Industrial Analysis FrameworkCost curve analysis

  Cost Curve Analysis

  By comparing the proportions of owned fleets and scrubber installation rates across different carriers (e.g., Evergreen vs. Maersk), the report effectively constructs an implicit ‘cost curve,’ revealing how low-cost operators can generate excess profits and squeeze higher-cost rivals amid widening fuel price differentials.

Asset mapping & comparison

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

• Evergreen Marine (2603.TW)

  Core recommended stock, benefiting from its owned-fleet advantage and high scrubber installation rate

  Strengths

  Approximately 30% of its fleet is owned, with a scrubber installation rate of 95%; industry-leading cost-control capabilities

  Comparison

  Compared with Maersk (about 39% owned fleet) and Hapag-Lloyd (about 40% owned), Evergreen’s owned-fleet share is not the highest, but its scrubber installation rate is far ahead, resulting in a more pronounced overall cost advantage

  Risks

  Escalation of geopolitical tensions posing route-disruption risks; global macroeconomic downturns suppressing cargo demand

• COSCO Shipping Holdings (601919.SS / 1919.HK)

  Core recommended stock, profiting from Asia–Pacific trade resilience and port-business synergies

  Strengths

  Strong growth in Asia–Europe and intra-Asia cargo volumes; rebounding Chinese port throughput provides fundamental support

  Comparison

  Compared with another Asian giant, OOCL, COSCO boasts stronger vertical integration through port assets such as COSCO Shipping Ports

  Risks

  Uncertainty in international trade policy (e.g., tariffs); RMB exchange-rate volatility

• TS Lines (2510.HK)

  Core recommended stock, reaping benefits from rapid regional-trade growth and an exceptionally lean cost structure

  Strengths

  A staggering 83% of its fleet is owned, with a scrubber installation rate of 94%; extremely compelling cost advantages

  Comparison

  Among all major carriers, TS Lines leads in both owned-fleet proportion and scrubber installation rate, boasting the most favorable cost structure

  Risks

  Relatively small scale limits its ability to absorb shocks compared with global giants

• Maersk (MAERSKB.DC)

  Listed as a reduce (Underweight) recommendation due to its cost disadvantages and profit pressures

  Strengths

  Extensive global network and deep customer base

  Weaknesses

  Only about 39% of its fleet is owned, and its scrubber installation rate is relatively low, leading to higher marginal costs in a high fuel-price-differential environment

  Comparison

  Compared with Asian peers like Evergreen and TS Lines, its cost disadvantage is acutely magnified in the current environment, putting profit margins under pressure

  Risks

  Freight-rate declines; execution of its transformation strategy (into a logistics services provider) falling short of expectations

Key data

• SCFI Freight Rate Index ChangeUp 73% from March, up 62% year-on-yearReflects the disruption premium stemming from Middle Eastern conflicts and shippers’ early stockpiling behavior
• Clarksons Port Congestion IndexAverage for January–May 2026 up 5% year-on-yearReached a record high, structurally absorbing effective capacity
• U.S. LMI Index (May)69.5Second-fastest expansion since early 2022, signaling end-demand resilience
• Asian Carrier Scrubber Installation RatesEvergreen 95%, TS Lines 94%, COSCO/OOCL 58%, Yang Ming 73%Significantly above the industry average of 47%, providing a cost advantage as high- and low-sulfur fuel prices diverge

Impact & implications

The report contends that the current recovery in industry conditions is not a fleeting pulse but is driven by multiple structural factors and should prove durable. For the market, this opens up room for revaluation of shipping stocks, particularly among Asian leaders with strong owned fleets and advanced environmental technologies. Downstream in the supply chain (e.g., importers, retailers), however, will face persistently high logistics costs, potentially prolonging inflationary pressures. Over the long term, tightening regulations (IMO net-zero targets) and rising orders for alternative fuels (LNG, methanol, accounting for 75% of newbuilds) are reshaping the competitive landscape, with capital-rich firms possessing robust technological capabilities poised to prevail.

Risks

• Continued escalation of Middle Eastern geopolitical tensions could lead to prolonged closures of key waterways (e.g., the Strait of Hormuz), triggering systemic supply-chain risks
• A significant global macroeconomic slowdown could dampen end-consumer demand and restocking intentions, reducing cargo volumes
• The IMO regulatory process accelerates beyond expectations, increasing compliance costs and capital-expenditure pressures on shipping companies

What to watch

• The trajectory of the SCFI freight rate index, particularly whether major trade routes can maintain their strength
• Marginal changes in congestion levels at major global ports (e.g., Shanghai, Rotterdam, Los Angeles)
• Progress in U.S.–China trade negotiations and their impact on global trade sentiment and cargo flows