ZIM Integrated stock: Outlook as shipping costs plunge continues

ZIM Integrated (NYSE: ZIM) stock price has moved sideways in the past few days as investors assess trends in the shipping industry. The shares were trading at $12.62, a few points above the year-to-date low of $11.77. They have dropped by more than 25% this year and over 71% in the past 12 months. 

Shipping costs are falling

ZIM Integrated Shipping share price has been under pressure lately as shipping costs continue falling. Data compiled by Freightos shows that the average container shipping cost has dropped to $1,290, the lowest level since September 2019. 

This means that container shipping companies are now making less money than they were earning before the pandemic started. At the peak of the pandemic, shipping costs were up to over $10,000, which helped ZIM Integrated’s revenue to jump to over $12 billion in 2022.

Container shipping costs are falling

As ZIM’s revenue and profitability jumped, the company rewarded its shareholders with some of the best dividends in recent years. It paid a $17 dividend in April 2022, the highest level on record, making it popular among income investors.

Recently, however, tides have turned and the company is earning less for every container shipped. As I wrote here, the company’s revenue and profitability worsened in the last quarter, pushing the management to suspend its dividend.

There is a likelihood that the company’s business will remain under pressure for a while since shipping costs have not bottomed yet. As such, ZIM Integrated will likely make a few more losses going forward.

For one, there are signs that global trade flows are not doing well. The most recent data showed that exports from countries like China and South Korea have dropped sharply in the past few months. This drop is giving exporters more negotiation power.

ZIM Integrated stock price analysis

ZIM chart by TradingView

The daily chart shows that the ZIM share price has been in a strong downward trend in the past few months. Its attempt to recover failed at $22.01 in May. The stock is trading slightly above the important support at $11.77, the lowest level since December last year.

At the same time, the shares have moved below the 25-day and 50-day moving averages. Therefore, the stock will likely continue falling as sellers target the next psychological level at $10. This view will be confirmed if it moves below the support at $11.77.