Global container volumes continued strong in 2025 with record August traffic despite weaker results from North America. August volume was 16.61 million twenty foot equivalent units, according to Container Trade Statistics, and the highest monthly volume ever, surpassing 16.59 million TEUs in May 2025. The record came despite an 0.5% decline in North American imports, including the United States, as a weaker August moderated a recovery that showed volumes up 1% in July year-to-date. For the first eight m ...

Core Viewpoint - SITC International reported strong 1H25 results, with revenue and net profit significantly exceeding expectations, driven by high freight rates and robust container shipping volume growth [1][2]. Financial Performance - Revenue for 1H25 increased by 28.0% YoY to US$1,664 million, while net profit attributable to shareholders rose by 79.7% YoY to US$630 million, resulting in an EPS of US$0.24 [1]. - The gross margin and net margin improved notably YoY, with gross margin rising by 9.3 percentage points and net margin increasing by 10.9 percentage points in 1H25 [1]. Dividend Policy - The company announced an interim dividend payout ratio of approximately 70%, which aligns with its 2024 interim payout ratio, offering attractive dividend yields of 9.5% for 2025 and 7.9% for 2026 [2]. Market Trends - There is a tight supply in the market for small vessels below 3,000 TEU, with only 5.4% of current orders for such vessels, while 11.2% of the fleet consists of vessels older than 25 years [3]. - Demand for small vessels in the container shipping industry has strengthened, leading to high time charter rates and longer charter periods, diverging from spot freight rate trends [4]. Intra-Asia Trade Growth - China's imports and exports to ASEAN countries and Japan grew by 9.4% and 4.5% YoY in the first seven months of 2025, indicating strong intra-Asia freight volume growth [5]. - As a leading player in intra-Asia routes, the company is expected to benefit from this growth, with Clarksons estimating a 3.6% and 3.0% YoY increase in intra-Asia container freight volume for 2025 and 2026, respectively [5]. Financial Forecasts - Due to better-than-expected freight rates, the company's net profit forecasts for 2025 and 2026 have been raised by 38.9% each to US$1.26 billion and US$1.06 billion, respectively [6]. - The stock is currently trading at 7.4x 2025 estimated P/E and 8.8x 2026 estimated P/E, with a target price increase of 15.2% to HK$28, implying 7.7x 2025 estimated P/E and 9.2x 2026 estimated P/E [6].

Investment Rating - The report maintains a cautious outlook on container shipping, downgrading the sector due to structural headwinds and demand uncertainty beyond August [9][10]. Core Insights - The report highlights that US tariffs have limited direct impact on the bulk and tanker markets, while the Baltic Dry Index (BDI) increased by 2% week-on-week, driven by higher Panamax earnings [9][10]. - The report suggests a buy rating for Maersk, a hold for SITC, and a reduction for several other companies in the container shipping sector, indicating a selective investment approach [9][10]. Summary by Sections US Tariff Updates - The Trump administration delayed the 10% baseline tariff and set various tariffs for key trading partners, with significant implications for trade dynamics [2]. - Tariffs on copper and other commodities are set to take effect, which may influence demand in the bulk market [4][53]. Container Shipping Trends - The Shanghai Containerized Freight Index (SCFI) dropped 1.7% week-on-week, marking the fifth consecutive week of decline, although rates to the US showed some recovery [33][34]. - The report notes that while front-loading may temporarily boost cargo flows, significant demand uncertainty looms due to potential tariff impacts [3][9]. Baltic Dry Index and Dry Bulk Market - The BDI rose 2% week-on-week, with Panamax rates increasing by 14% due to strong demand in the Atlantic basin, while Capesize rates fell by 12% due to weak iron ore demand [52][58]. - The report anticipates a 3% growth in the dry bulk fleet but expects flattish demand, leading to a softening of freight rates in the coming years [58]. Freight Rates and Market Dynamics - Container shipping freight rates have shown variability, with the SCFI composite index reflecting a significant year-on-year decline of 43.3% [50]. - The report indicates that bunker prices and time charter rates are also trending, with specific rates for different vessel types being monitored closely [50][57].

Key Takeaways from the Global Container Shipping Call Industry Overview - **Industry**: Global Container Shipping - **Key Players**: Adani Ports, Concor, Maersk, Matson, ZIM Core Insights 1. **Geopolitical Impact**: Geopolitical tensions and recent tariffs by the USA administration are influencing global container freight volumes and rates, which are expected to remain strong in CY25 [1][3][10] 2. **Volume Correlation**: India Port Container volumes show a high correlation with global GDP and container growth, indicating potential benefits for Adani Ports and Concor from rising container trade [1][4][10] 3. **Rate Fluctuations**: Asia-US West Coast rates spiked by 40% following the China-US trade agreement, despite a 30-40% YoY drop in China-US volumes in April [2] 4. **Demand Dynamics**: Non-China-US trade lanes experienced a 4-5% demand growth, offsetting the decline in China-US volumes, leading to overall positive demand growth globally [2] 5. **Future Projections**: Global container rates increased by 136% YoY in CY24 due to Middle East tensions, but are expected to moderate by 30% YoY in CY25, with rates remaining elevated [3][10] Company-Specific Insights 1. **Adani Ports Performance**: In FY25, Adani Ports' container volumes rose by 22% YoY, contributing to 42% of its total volume mix, while overall port volumes increased by 11% YoY [4][10] 2. **Concor's Volume Growth**: Concor's volumes are heavily reliant on EXIM trade, which constitutes 81% of its total volumes, although its growth was impacted by a weak rail modal share [4] 3. **Trade Deal Potential**: An interim trade deal between India and the US is anticipated by June 25, which could further boost port container volumes ahead of the peak season [5] Additional Considerations 1. **Inventory Trends**: US retail inventories have been building at a moderate pace of +4.5% YoY, compared to sales growth of +4%, indicating a key dynamic to monitor [2] 2. **Capacity Adjustments**: Approximately 12% of global container capacity has been removed due to rerouting around the Cape of Good Hope, impacting Asia-Europe trade significantly [3][10] 3. **Suez Canal Normalization**: A return to normalcy in the Suez Canal could lead to excess capacity and a potential decline in container rates [3] This summary encapsulates the critical insights from the global container shipping call, highlighting the interplay between geopolitical factors, trade dynamics, and company-specific performance within the industry.

Investment Rating - The report does not explicitly provide an investment rating for the industry or specific companies Core Insights - The China Export Tracker focuses on the dynamics of China exports to the US amid tariff escalations, analyzing data from 48 corporates representing nearly 70% of China export value to the US [2][41] - Export orders from the US to Chinese corporates have stabilized at 92% of pre-tariff levels as of April 28, 2025, showing a slight recovery from 90% in mid-April [3][12] - The report indicates that nearly 20% of corporates have seen improvements in exports to non-US regions, particularly in sectors like pet treats and construction machinery [4] - China shipments and production are in substantial decline, with 35% of US orders being filled from China and 57% from ex-China facilities [11][17] - Corporates report that 40% of their products are experiencing high impacts on shipments to the US, with a significant portion seeing declines of over 50% [12][18] Summary by Sections Export Orders and Shipments - Export orders from the US have largely remained unchanged, with a slight increase noted [3] - Shipments from China are significantly impacted, with many corporates reporting a decline in production and shipments [5][12] Supply Chain Adjustments - Corporates are adjusting supply chains, with many utilizing ex-China production facilities to fulfill US orders [11][13] - Nearly half of the corporates have reported stable or increasing inventory levels in the US, providing a buffer against supply chain disruptions [21][23] Pricing Discussions - Approximately 60% of corporates are engaged in pricing negotiations, with expectations that end users will absorb most tariff costs [25][29] - There is a consensus that tariffs above 30-40% could become unmanageable for the global supply chain [26][31] Capital Allocation and Expansion Plans - Nearly 60% of corporates have ex-China production facilities, with 63% planning to expand or establish overseas capacity despite tariff uncertainties [32] - Corporates are cautious about capital expansion plans, particularly in Mexico and the US, due to ongoing uncertainties [59][61] Container Shipping and Import Data - US container imports from China showed a year-on-year increase of 9% in Q1 2025, but projections indicate a decline of 15% in Q2 and 27% in Q3 2025 [33][35] - Container shipping data has not yet reflected the anticipated decline, with current volumes still showing positive growth [35][36]