HSBC Lowers Rating on Container Stocks as US East Coast Strike Concludes

HSBC has downgraded major container stocks, predicting a slowdown in earnings following disruptions from a brief labor strike on the U.S. east coast, which proved to be less severe than anticipated.

The brokerage highlighted that while the shipping industry experienced growth during the challenges of 2024, current issues in the Red Sea are unlikely to exert additional pressure, and the recent strike in the U.S. no longer poses a significant threat.

This evolving situation indicates a likely oversupply in shipping as demand sharply declines in 2025-2026, putting added pressure on pure-play shipping operators due to falling freight rates.

As part of their downgrades, HSBC has shifted Evergreen Corp from Buy to Hold, and reduced ratings for COSCO SHIPPING Holdings and Orient Overseas International Ltd from Hold to Reduce.

Conversely, HSBC has retained its Buy rating for Maersk, citing improved margins in its logistics sector, and continued its Buy rating for SITC International Holdings Co Ltd, praising its effective cost management and strong shareholder returns.

The firm also maintained its Reduce rating on Hapag Lloyd AG, citing concerns about high valuations.

In 2024, global shipping rates surged as disruptions and rerouting in the Red Sea due to Houthi activities resulted in widespread backlogs. Initially, the U.S. east coast strike was expected to exacerbate these issues; however, an agreement was reached after just three days of labor actions.

HSBC acknowledged that while future setbacks could still benefit the shipping industry, a downcycle is likely on the horizon. They project modest growth in 2025 and a decline in 2026, especially if tensions in the Red Sea diminish.