In its latest press release on 12 July, $ZIM Integrated Shipping Services Ltd.(ZIM)$ downgraded their forecast for FY2023, which rightly sparked a market sell off. I'm expecting the price to continue trending back below $12.
Can bullish market overturn bearish sentiment?
With the recent CPI report and the Fed pause in June, we're starting to feel more confident that the worst is over and that interest rates will probably not go up much further, with some of us going so far as to speculate interest rate cuts happening by year end.
Will our economy start picking up in H2 2023, and won't that be good news for ZIM?
How important is US-Sino trade to ZIM?
The Pacific trade route accounts for a majority of ZIM recent revenue in 2022 (stats taken from Statista), with 34.3% of freight volume via the Pacific trade route and having the highest average frieght rate per TEU of USD4,743. This significantly dwarves its second highest average frieght rate per TEU of USD3,120 for the Latin America trade route.
Quoted from Statista: In 2022, Zim Integrated Shipping Services Ltd. (ZIM) transported 3,380 TEUs. Most of the containers shipped were via the Pacific trade route at 1,160 TEUs. The Intra-Asia channel had the second highest container traffic at 1,058 TEUs.
A quick glance at where ZIM gets their revenue
Trade between US and China has always been good, and any decline in such trade will have a significant impact on ZIM's bottom line.
Focus on US-Sino trade relations
China's recent ban on gallium exports, and both countries push to bring production of chips, particularly AI chips, to their shores, bode ill for the trade that ZIM is reliant on for a bulk of its revenue.
It is hence heartening news that U.S. Treasury Secretary Janet Yellen visits China. Though expectations are low for this visit, there's still hope that some compromise can be reached. The world economy, and ZIM, depends on it.
🇺🇸 🤝 🇨🇳
My two cents
I'll continue to hold, and average down if price drops below $10. I believe ZIM can ride out an economic downturn. But as my article highlights, that's not the concern I'm focusing on. If the US-Sino new normal gets more aggressive, I might need to reconsider whether ZIM is a viable counter even for the long term.
We’re looking out for the wrong things for ZIM
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
