This shipping stock is 'in an enviable position' for a protracted port strike, says analyst

By James Rogers

Global Ship Lease is well positioned for a drawn-out strike, says B. Riley Securities analyst Liam Burke.

While a prolonged strike at East Coast and Gulf ports would spell bad news for the U.S. economy, it could provide a boost to shipping company Global Ship Lease Inc., according to Liam Burke, managing director at B. Riley Securities.

"Right now, they are in a very enviable position," he told MarketWatch.

Global Ship Lease (GSL), which was spun out of shipping giant CMA CGM in 2007, leases ships to container shipping companies. The company's customers include A.P. Moeller-Maersk (DK:MAERSK.A) (DK:MAERSK.B), Hapag-Lloyd AG (XE:HLAG) (UK:0RCG) (HPGLY), ZIM Integrated Shipping Services Ltd. (ZIM), and CMA-CGM.

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Burke doesn't see the strike as a particular benefit to GSL at the moment, noting that the company has "existing, in-place, longer-term charters." However, demand for the company's fleet of ships will increase as the port strike drags continues, according to the analyst. "The longer this [strike] goes on, the more valuable their assets become," he told MarketWatch.

Global Ship Lease shares are up 32.7% in 2024, outpacing the S&P 500 index's SPX gain of 19.7%.

As of June 30, Global Ship Lease had 68 containerships in its fleet. Global Ship Lease recently received upgrades from Moody's Investor Service, S&P Global Ratings, and the Kroll Bond Rating Agency.

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Container traders and leasing companies have also expressed growing concern over the potential length and severity of the strike, according to Container xChange, an online container trading and leasing platform.

"The timing of this strike is especially challenging as we are in our traditional peak season," said Container xChange CEO Christian Roeloffs, in a statement. "While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules."

The strike began just after midnight Tuesday following the expiration of the contract between the International Longshoremen's Association and the United States Maritime Alliance (USMX). President Biden urged the United States Maritime Alliance "to negotiate a fair contract with the longshoremen," in a statement released Tuesday.

Related: Ports strike could have $4 billion daily impact, but these container stocks are well positioned

"USMX's goal continues to be focused on ratifying a new Master Contract that addresses all the critical issues the parties need to bargain," said the United States Maritime Alliance, in a statement Wednesday. "Reaching an agreement will require negotiating - and our full focus is on how to return to the table to further discuss these vital components, many of which are intertwined. We cannot agree to preconditions to return to bargaining - but we remain committed to bargaining in good faith to address the ILA's demands and USMX's concerns."

In a statement released Tuesday the ILA said the union has been fully prepared "to negotiate a fair contract since two years before its expiration."

"Our members feel underappreciated, especially given the sacrifices they made during the pandemic, keeping ports open and the economy moving," the union added. "The wage increases in the previous contract were rendered meaningless by rising inflation."

-James Rogers

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10-03-24 0820ET

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