Shipping Stocks Jump in Asia as Omicron Variant threatens supply chains

HONG KONG : Shares of shipping companies are trading higher in Asian markets as a fast-spreading variant of Covid-19 increases the prospect of supply-chain disruptions that could keep freight rates elevated.

In Hong Kong, Cosco Shipping Holdings Co. rose as much as 11% to its highest level since late September, boosting year-to-date gains to 79%. Orient Overseas (International) Ltd. added 5.5%, SITC International Holdings Co. advanced 3.5% and Pacific Basin Shipping Ltd. was 2.5% higher.

In Japan, Nippon Yusen, Mitsui O.S.K. Lines and Kawasaki Kisen Kaisha were up 2.2%-2.7% in afternoon trading. Elsewhere, South Korea’s HMM Co. added 1.2% while Taiwanese shippers Yang Ming Marine Transport Corp. and Evergreen Marine Corp. (Taiwan) Ltd. were 1.4% and 1.3% higher, respectively.

Lockdown measures in one country will “affect the whole supply chain,” Daiwa Capital Markets analyst Kelvin Lau said, adding that “freight rates will be rallying quite a lot” due to the disruptions. That will be reflected in shipping companies’ earnings very soon as many of them charge spot rates, and shippers “have a lot of bargaining power because there isn’t enough capacity,” he said.

Shipping companies’ earnings have soared to historic highs in recent quarters due to high freight prices and shipping volumes as the pandemic supercharged demand for goods, including protective gear and work-from-home equipment. Shipping stocks have risen in tandem, retreating only in early October amid expectations of lower freight rates as the pandemic outlook improved and factory production in China was hit by power shortages.