World-Watching: Container Shipping Financial Insight, Nov. 2023

[from Drewry Shipping Consultants]

Driven by weak 3Q23 financial results, the Drewry Container Equity Index decreased 3.7% last month (as of 22 Nov 2023). Additionally, asset prices continue to fall due to the supply-demand imbalance.

  • Container shipping companies’ 3Q23 financial results showcased a sharp dip in profits or even losses. On a group level, eleven liners (which report quarterly results) among our portfolio of 13 companies reported an average slump of 54.6% YoY in their 3Q23 topline. Operating costs declined 18.1% YoY amid falling chartering costs and lowering bunker prices. However, the cost reduction was insufficient to offset the plunge in topline; thus, EBIT contracted 94.1% YoY on average.
  • The Drewry Container Equity Index tumbled 28.1% YTD 2023 (ending 22 November), driven by lowering freight rates (WCI: -30.7% in YTD 2023), which squeezed earnings over the quarters. On the contrary, the S&P 500 posted an 18.4% growth. The Drewry Container Equity Index declined 3.4% in the month ending 22 November 2023. Talking about equity prices individually, APMM’s stock price fell 9.0% amid EBIT loss for its Ocean segment in 3Q23, staff cuts and reduced capex guidance, highlighting APMM’s efforts toward reducing costs faced with the bleak industry outlook. Hapag-Lloyd’s stock price slumped 22.2% as its EBIT margin (3Q23: 5.1%) slid below its pre-pandemic level (3Q19: 7.8%). ZIM became the first carrier to report impairment of assets worth USD 2.0bn in 3Q23, and its stock price fell 18.1%. Meanwhile, China-exposed container companies benefitted from the positive sentiment arising from the proposed fiscal stimulus by the Chinese government, possibly boosting the out-of-China and intra-Asia trades. Asian stocks in the broader index rose 2.0% to 19.4% in the month ending 22 November 2023.
  • Mainly driven by weak earnings prospects, the Drewry Container Equity Index trades at a P/B of 0.5x, a 47.5% discount to its pre-pandemic average (2013-19). We expect freight rates to fall sharply in 2024 and increasingly incur losses. Thus, we expect the multiple to remain suppressed.
  • As the fleet of container shipping companies expands, the charter market softens. For instance, 1-year TC rates declined 14.2% and 52.5% YoY in October for vessels sized 1,110 teu and 8,500 teu. Rates declined more for larger vessels as these constitute the majority of the order book and new deliveries. The YoY decline has continued since October 2022, but rates improved slightly during April-May 2023. However, this was not due to the fundamentally strong market but MSC and CMA CGM’s aggressive chartering of vessels to expand their fleets. Now that the two companies have stopped chartering in vessels, the charter market continues to decline.
  • Driven by the softening charter market, second-hand asset prices are also weakening. In October, on a YoY basis, prices for five-year-old vessels (2,700 teu and 7,200 teu) contracted 30.6% and 31.5%, and for 10-year-old ships, prices tumbled between 36.7% and 53.2%. Contrary to the sale and purchase market, newbuild prices (1,500 teu and 14,000 teu) continue to increase and rose by an average of 2.2% YoY, led by a shortage of capacity in shipyards.
  • The charter market and the S&P market have a direct impact on container shipping companies’ earnings. Costs related to chartering-in slots or vessels from other non-operating vessel owners form a significant portion of container shipping companies’ cost structure. In the 3Q23 results, this cost was reduced,
    marginally relieving downside pressure on the operating margin of container shipping companies. In line with the declining charter market, we expect this trend to continue in 4Q23. We also expect other companies to follow ZIM in reporting impairment losses as prices for older vessels continue to fall.

Read the report [archived PDF] for additional graphs.

World-Watching: Germany Bundesbank: What Moves Markets?

[Deutsche Bundesbank discussion paper 16/2022 by Mark Kerssenfischer & Maik Schmeling]

Non-technical summary

Research question

A key question in the macro-finance literature concerns the drivers of asset prices. Are asset prices mainly driven by news, or by changes in sentiment and other factors unrelated to economic fundamentals? In most asset pricing models, news play a dominant role. But in empirical investigations, the explanatory power of news is often quite low.


We study the explanatory power of news by building a large, time-stamped event database covering a wealth of news related to the macroeconomy, including macroeconomic data releases, central bank announcements, bond auctions, election results, sovereign rating downgrades, and natural catastrophes. We combine this event database with high-frequency stock price and bond yield changes, both for the U.S. and the euro area, going back to 2002.


We find that roughly half of all stock and bond price movements in the U.S. and euro area occur in tight windows around clearly identifiable news and in this sense can be explained by those news. On the positive side, this share is much higher than most previous studies found. However, our results still ascribe a large role to return variation that cannot be linked to news about economic fundamentals.

Read the paper [archived PDF].

Words and Reality and Change: What Is a Fluctuation?

Ludwig Boltzmann who died in 1906 was a giant in the history of physics.

His name is associated with various fields like statistical mechanics, entropy and so on.

A standard physics overview book called Introducing Quantum Theory (2007, Icon/Totem Books) shows a “cartoon” of Boltzmann which says, “I also introduced the controversial notion of fluctuations.” (page 25)

In common parlance, some common synonyms of fluctuate are oscillate, sway, swing, undulate, vibrate and waver. While all these words mean “to move from one direction to its opposite,” fluctuate suggests (sort of) constant irregular changes of level, intensity or value. Pulses and some pulsations suggest themselves as related.

Expressions like “Boltzmann brains” refer to this great physicist Boltzmann and you can find this notion described here: “Boltzmann Brain.”

Notice that the word “fluctuation” occurs four times in one of the paragraphs of the article “Boltzmann Brain,” as you can see:

“In 1931, astronomer Arthur Eddington pointed out that, because a large fluctuation is exponentially less probable than a small fluctuation, observers in Boltzmann universes will be vastly outnumbered by observers in smaller fluctuations. Physicist Richard Feynman published a similar counterargument within his widely read 1964 Feynman Lectures on Physics. By 2004, physicists had pushed Eddington’s observation to its logical conclusion: the most numerous observers in an eternity of thermal fluctuations would be minimal “Boltzmann brains” popping up in an otherwise featureless universe.”

You may remember perhaps you’ve also heard the term, perhaps on a PBS Nova episode on quantum fluctuation.

In the classic history of science book, The Merely Personal by Dr. Jeremy Bernstein (Ivan Dee, Chicago, 2001), one encounters the word fluctuation all over:

“This uniform density of matter …and fluctuations from the average are what would produce the unwanted instability.”

“So Einstein chose the cosmological constant…” (page 83 of Bernstein’s book)

Suppose we allow our minds to be restless and turn to economics to “change the lens” we are using to look at the world, since lens-changing is one of the pillars of Meta Intelligence.

What do we see?

In 1927, Keynes’s professor Arthur Cecil Pigou (died in 1959) published the famous work, Industrial Fluctuations.

In 1915, twelve years earlier, the famous Sir Dennis Holme Robertson (died in 1963) published A Study of Industrial Fluctuation.

The word fluctuation seems to be migrating to or resonating in economics.

The larger point (i.e., the Meta Intelligent one): is the use of this word a linguistic accident or fashion or is something basic being discovered about how some “things” “jump around” in the world?

Is the world seen as more “jumpy” or has it become more jumpy due to global integration or disintegration or in going to the deeper levels of physics with the replacement of a Newtonian world by an Einsteinian one?

The phenomena of change—call it “change-ology” whooshes up in front of us and a Meta Intelligent student of the world would immediately ponder fluctuations versus blips versus oscillations versus jumps and saltations (used in biology) and so on. What about pulsations? Gyrations?

This immediately places in front of you the question of the relationship of languages (words, numbers, images) to events.

The point is not to nail down some final answer. Our task here is not to delve into fields like physics or economics or whatever but to notice the very terms we are using across fields and in daily life (i.e., stock price fluctuations).

Notice, say, how the next blog post on oil price dynamics begins:

“Our oil price decomposition, reported weekly, examines what’s behind recent fluctuations in oil prices…”

The real point is to keep pondering and “sniffing” (i.e., Meta Intelligence), since MI is an awareness quest before all.