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ZIM: Fade The Houthi Induced Rally (Rating Downgrade)

Update - Jan. 5, 2023

ZIM has surged to $15 due to ongoing issues in the Red Sea with the Houthi's attacking container ships. While shipping rates have surged, the issues will just add to the capacity problems through 2025 with new vessels coming online, instead of low rates revolving the problems.

-New container shipping equal to about 11% of the current fleet will enter the seas this year, according to DNB Markets estimates. DNB reckons shippers will add additional capacity equal to 7% of the current fleet in 2025. And the brokerage estimates that fleet utilization was only about 70% in 2023 before the disruptions—well below levels in recent years which have consistently been over 80%.

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Original article posted on Dec. 31, 2023 

  • Shipping stocks like ZIM Integrated Shipping Services Ltd. have surged due to disruptions in the Red Sea caused by Houthi militants.
  • The attacks have led to longer travel times for ships, boosting container shipping rates to Europe and the East Coast of the US.
  • The short-term shipping surge is not expected to last, and ZIM's capacity growth through 2024 and weak shipping rates pose downside risks.
  • The stock is poised to retest the recent lows around $6.
As the shipping channel in the Red Sea has the been upset by Houthi militants, shipping stocks like ZIM Integrated Shipping Services Ltd. (NYSE:ZIMhave soared. The stocks were crushed in 2023 due to weak container shipping demand and high new vessel supply hitting the market. My investment thesis is now turning Bearish on the stock following the surge to $12 this last week after ZIM traded down at $6.

Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 


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