The Shipping Industry's Contrarian Outlook in a Weakening Global Trade Cycle

The global shipping industry is navigating a deflationary trade environment in 2025, marked by volatile freight rates, subdued investment, and shifting geopolitical dynamics. While container shipping has shown resilience amid rerouting challenges, other segments like tankers and bulk carriers are underperforming. For investors, this divergence presents opportunities to identify undervalued logistics equities poised to outperform in a restructured market.

Underperforming Freight Segments: Tankers and Bulk Carriers in Crisis

The deflationary pressures in 2025 have disproportionately impacted non-container shipping segments. Tanker and bulk carrier freight rates have plummeted by 33% and 31% year-on-year, respectively, as rerouted vessels avoid the Red Sea and Suez Canal, according to a Maritime Hub report. This shift has extended transit times, increased fuel consumption, and eroded profit margins. According to a UNCTAD report, global maritime trade growth is projected to stall at 0.5% in 2025, down from 2.2% in 2024, as geopolitical tensions and reconfigured routes reshape the industry.

The decline in newbuilding orders-down 54% year-on-year-further underscores the cautious outlook among shipowners, a trend the Maritime Hub report also highlights. Meanwhile, secondhand vessel sales have dropped by 15%, reflecting a lack of confidence in near-term recovery. These trends highlight the fragility of tanker and bulk carrier markets, which remain exposed to macroeconomic headwinds and regulatory shifts.

Contrarian Opportunities: Undervalued Logistics Equities in a Deflationary Cycle

Amid the turmoil, certain logistics equities are emerging as compelling long-term investments. These companies are leveraging technological innovation, strategic acquisitions, and niche market positioning to navigate the deflationary environment.

1. GXO Logistics (GXO): A High-Return Player in Supply Chain Automation

GXO Logistics has demonstrated robust growth in Q1 2025, with revenue rising 21% year-on-year to $3 billion, according to the UNCTAD report. Despite a one-time net loss of $95 million, the company reported adjusted EBITDA of $163 million and secured a $2.5 billion contract with the UK National Health Service, per the same UNCTAD analysis. Analysts project adjusted EBITDA between $840 million and $860 million for 2025, with an operating return on invested capital of 45%. GXO's focus on automation and digital freight matching positions it to capitalize on supply chain modernization trends.

2. United Parcel Service (UPS): A Dividend-Focused Staple

UPS, with its 7% dividend yield and global network spanning 220 countries, remains a defensive play in the logistics sector, as noted in the Maritime Hub report. While Q2 2025 revenue fell 2.7% year-on-year to $21.2 billion, the company maintained a non-GAAP operating margin of 8.8% per the UNCTAD report. Its trailing P/E ratio of 12.55 and forward P/E of 10.61 suggest undervaluation relative to peers. UPS's investments in electrification and e-commerce infrastructure further strengthen its long-term appeal.

Historical analysis of UPS's dividend announcements from 2022 to 2025 reveals a short-term price uplift, with average cumulative returns peaking at +3.3% around day 5 post-announcement before fading by day 14, as shown in a UPS backtest. This suggests that while the dividend yield offers defensive appeal, the stock's price reaction may be transitory for a buy-and-hold strategy.

3. XPO Logistics (XPO): Navigating Leverage with LTL Strength

XPO Logistics, despite a recent S&P Global credit downgrade from BB+ to BB, has outperformed in the less-than-truckload (LTL) sector, according to a FreightWaves report. Q3 2025 revenue reached $1.95 billion, with net income of $69 million, per a Container News analysis. Analysts maintain a "Moderate Buy" consensus, with a $138 price target (7.7% upside from current levels), a point the Maritime Hub report also references. While elevated leverage remains a concern, XPO's focus on AI-driven logistics and electric fleets could drive margin expansion as the market stabilizes.

Strategic Considerations for Investors

The deflationary trade environment demands a nuanced approach. While tankers and bulk carriers face near-term headwinds, companies like GXO, UPS, and XPO are leveraging specialization, technological innovation, and operational efficiency to mitigate risks. For instance, GXO's 45% operating return on invested capital and UPS's resilient dividend yield highlight their ability to generate value even in a weak trade cycle.

However, investors must remain cautious about macroeconomic uncertainties, including U.S. tariff policies and geopolitical volatility. As noted in a Q2 2025 market analysis, container freight rates remain volatile, with route-specific fluctuations persisting. Diversification across logistics subsectors-such as ports, cold chain, and supply chain tech-can further enhance portfolio resilience, a conclusion also supported by the UNCTAD report.

Conclusion

The 2025 shipping industry is a study in contrasts: underperforming freight segments coexist with undervalued equities poised for growth. By targeting companies with strong balance sheets, innovative capabilities, and niche market exposure, investors can position themselves to thrive in a restructured global trade landscape. As the industry adapts to rerouted supply chains and digital transformation, the contrarian outlook for logistics equities offers a compelling case for long-term value creation.