- Firm rakes in money on higher rates
- Panama and Suez passages choked
- UK retailers could be affected
Shares in shipbroking and shipping services group Clarkson (CKN) were the stand-out performer in the FTSE 250 after chief executive Andi Case raised the outlook for full-year earnings.
Clarkson shares jumped as much as 9.5% to £35.95, taking them to a new 12-month high and straight to the top of the mid-cap leader board.
SHIPPING RATES ARE SOARING
The firm enjoyed strong trading in the final quarter of 2023, helped by a sharp rise in charter rates due to difficulties with both the Panama Canal and the Suez Canal as Shares flagged last month.
Climate change and geopolitics could force transport costs higher again
The Panama Canal, a crucial waterway which handles $270 billion in global trade each year, has been suffering from its worst drought in decades with water levels six feet lower than normal which has restricted the passage of large container ships.
Companies wanting to use the canal are having to pay millions either to jump the queue or send their ships around the tip of South America.
Meanwhile, attacks by Iranian-backed Houthi rebels on shipping entering the Red Sea to access the Suez Canal has forced traffic from Asia to Europe and Europe to Asia to take the much longer route around the tip of South Africa.
The trip around South Africa adds around 10 days to the average journey and means shippers face much higher fuel and labour costs.
According to Bloomberg, the day rate to bring a 40-foot container from Asia to Northern Europe has soared by 173% since Christmas with consumers likely to face higher prices as companies pass on the increased cost.
For Clarkson, higher rates mean higher earnings and the firm is now expecting underlying pre-tax profit for 2023 to be above market expectations and ‘not less than £108 million’.
RETAILERS IN FOCUS NEXT WEEK
In its full-year trading update yesterday, UK clothing and homewares retailer Next (NXT) cited difficulty with access to the Suez Canal as a specific risk for its business as it could cause delays in stock deliveries this year.
Investors will therefore be watching to see if there are similar mentions of a risk of delay when rival retailers release their year-end trading updates, in particular B&M European Value (BME), which reports next Tuesday (9 January), and Marks & Spencer (MKS), which reports next Thursday (11 January).
