Shipping Sector Changes Course; What It Means for ETFs

September 10th at 2:00pm by Tom Lydon

The reduction in transport volume and fall in freight rates that have been witnessed by the shipping sector have taken their toll on exchange traded funds (ETFs), but some are devising formulas to overcome this obstacle.

Things have been tough for shipping companies as corporations around the globe have implemented lean measures, including trimming inventories and cutting order loads, to cope with the global economic crisis. Most recently, Danish shipping giant Maersk Line, reported a loss in the first half of the year of nearly $1 billion because of a reduction in freight rates and lower transport volumes.

According to Analia Murias of FIS Worldnews, shipping companies have been partnering with ship owners to inject capital and/or sell dispensable assets as well as renegotiating contracts with shipyards to cope with the downfall.

Things are improving for shipping companies as the overall health of the global economy improves and businesses start to replenish inventories that have been depleted. Experts in the industry, however, such as the head of Maersk, believe that the recovery will be slower than in other sectors and industries.