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The global shipping industry has been suffering from headwinds like inflationary pressures, resultant high interest rates, increased fuel price and supply-chain disruptions. Despite headwinds, this crucial industry stands to benefit from favorable factors such as the reopening of the Chinese economy since early 2023 and an improvement in the demand for goods and commodities compared to the lows experienced during the pandemic.
Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. Clerc anticipates a gradual rebound in the shipping industry as we approach 2024, as quoted on CNBC. The Zacks Transportation - Shipping industry currently carries a Zacks Industry Rank #87, which places it in the top 35% of 245 Zacks industries.
Let’s delve a little deeper.
Consumer-Driven Demand
Vincent Clerc points to consumers in the United States and Europe will act as key tailwinds in the current surge in demand. These markets continue to defy expectations, consistently surpassing forecasts. In 2022, Maersk had warned of weak demand, citing overstocked warehouses, waning consumer confidence, and congested supply chains. However, the tide appears to be turning, with the upcoming pickup in shipping expected to be fueled by consumer consumption rather than an inventory correction.
Strong LNG Market
Upbeat demand for liquefied natural gas (LNG) represents a huge positive for shipping stocks. The elevated levels of inflation and the unrest in Middle East raised oil and natural gas prices. Moreover, amid the prolonged Russia-Ukraine war, Europe is likely to seek gas supplies outside Russia. This is expected to drive demand for LNG vessels.
Emerging Markets Resilience
Despite facing a challenging economic climate, emerging markets are representing an amazing resilience. Clerc highlights India, Latin America, and Africa as standout examples. These regions have managed to weather the storm and sustain demand, displaying their potential as growth drivers for the shipping industry.
North America's Strong Prospects
North America remains a promise for the shipping sector. The Fed recently revised upward their economic growth forecasts for the current year, with GDP expected to rise by 2.1%, more than double the June estimate. This suggests an expectation of continued economic expansion without an imminent recession. The GDP outlook for 2024 also increased from 1.1% to 1.5%. In fact, rates are also peaking in the United States.
Notably, the United States witnessed a substantial economic growth in the third quarter of 2023, with the real GDP growing at an annual rate of 4.9%, beating the economists’ expectations of 4.7%. Consumer spending was one of the main contributors to the U.S. GDP growth. The GDP increase marked the largest gain since the fourth quarter of 2021.
Against this backdrop, below we highlight a few shipping ETFs that could be tapped for gains over the medium term.
The underlying Capesize 5TC Index, Panamax 4TC Index & Supramax 6TC Index measure rates for shipping dry bulk freight. The expense ratio of the fund is 3.50%.
The underlying Solactive Global Shipping Index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges 69 bps in fees and yields 14.20% annually.
The underlying U.S. Global Sea to Sky Cargo Index tracks the performance of marine shipping, air freight and courier, and port and harbour operating companies. The fund charges 60 bps in fees and yields 17.55% annually.
The underlying Breakwave Tanker Futures Index follows the near-dated futures market on a constant rolling basis. The expense ratio of the fund is 3.50%.
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Why to Bet on Shipping ETFs Now
The global shipping industry has been suffering from headwinds like inflationary pressures, resultant high interest rates, increased fuel price and supply-chain disruptions. Despite headwinds, this crucial industry stands to benefit from favorable factors such as the reopening of the Chinese economy since early 2023 and an improvement in the demand for goods and commodities compared to the lows experienced during the pandemic.
Global trade is showing promising signs of recovery, as evident from the insights of Vincent Clerc, the CEO of shipping giant Maersk. Clerc anticipates a gradual rebound in the shipping industry as we approach 2024, as quoted on CNBC. The Zacks Transportation - Shipping industry currently carries a Zacks Industry Rank #87, which places it in the top 35% of 245 Zacks industries.
Let’s delve a little deeper.
Consumer-Driven Demand
Vincent Clerc points to consumers in the United States and Europe will act as key tailwinds in the current surge in demand. These markets continue to defy expectations, consistently surpassing forecasts. In 2022, Maersk had warned of weak demand, citing overstocked warehouses, waning consumer confidence, and congested supply chains. However, the tide appears to be turning, with the upcoming pickup in shipping expected to be fueled by consumer consumption rather than an inventory correction.
Strong LNG Market
Upbeat demand for liquefied natural gas (LNG) represents a huge positive for shipping stocks. The elevated levels of inflation and the unrest in Middle East raised oil and natural gas prices. Moreover, amid the prolonged Russia-Ukraine war, Europe is likely to seek gas supplies outside Russia. This is expected to drive demand for LNG vessels.
Emerging Markets Resilience
Despite facing a challenging economic climate, emerging markets are representing an amazing resilience. Clerc highlights India, Latin America, and Africa as standout examples. These regions have managed to weather the storm and sustain demand, displaying their potential as growth drivers for the shipping industry.
North America's Strong Prospects
North America remains a promise for the shipping sector. The Fed recently revised upward their economic growth forecasts for the current year, with GDP expected to rise by 2.1%, more than double the June estimate. This suggests an expectation of continued economic expansion without an imminent recession. The GDP outlook for 2024 also increased from 1.1% to 1.5%. In fact, rates are also peaking in the United States.
Notably, the United States witnessed a substantial economic growth in the third quarter of 2023, with the real GDP growing at an annual rate of 4.9%, beating the economists’ expectations of 4.7%. Consumer spending was one of the main contributors to the U.S. GDP growth. The GDP increase marked the largest gain since the fourth quarter of 2021.
Against this backdrop, below we highlight a few shipping ETFs that could be tapped for gains over the medium term.
ETFs in Focus
Breakwave Dry Bulk Shipping ETF (BDRY - Free Report)
The underlying Capesize 5TC Index, Panamax 4TC Index & Supramax 6TC Index measure rates for shipping dry bulk freight. The expense ratio of the fund is 3.50%.
SonicShares Global Shipping ETF (BOAT - Free Report)
The underlying Solactive Global Shipping Index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The fund charges 69 bps in fees and yields 14.20% annually.
U.S. Global Sea To Sky Cargo ETF (SEA - Free Report)
The underlying U.S. Global Sea to Sky Cargo Index tracks the performance of marine shipping, air freight and courier, and port and harbour operating companies. The fund charges 60 bps in fees and yields 17.55% annually.
Breakwave Tanker Shipping ETF (BWET - Free Report)
The underlying Breakwave Tanker Futures Index follows the near-dated futures market on a constant rolling basis. The expense ratio of the fund is 3.50%.