Shipping lines continue to show their financial success despite constant disruptions
This is because most containerized cargo is mobilized under strong long-term tariff contracts.
The world’s main shipping lines are on track to record profits in 2022 that would exceed last year’s record by 73%, according to the latest forecasts driven by a port congestion that refuses to give way, labor tensions in different parts of the world and other disruptions that are reducing capacity amid a demand for imports, which, despite all projections, is still at a steady pace in the US.
According to this year’s net revenue of the top 11 operators in the sector could reach US$256 billion. The figure would imply an increase of US$36 billion over the estimate delivered in April. Last year’s figure reached an all-time high of $148 billion, exposed Bloomberg John McCown, founder of Blue Alpha Capital.
Two years of economic turmoil have transformed the sector that transports about 80 per cent of world trade in goods from a constant loser to one of the most astonishing financial successes of the pandemic. However, this turn of fortune is generating criticism beyond shipping users, as inflation takes over the world’s economies and politicians look to blame for what has increased the scrutiny of shipping lines.
Wave of disruptions
But also among the concerns of the sector remain latent the labor conflicts around the ports. Thus, in the United Kingdom, some 2,000 workers from the port of Felixstowe have announced an eight-day strike for this month after being unable to reach a wage agreement. Meanwhile, on the west coast of the US, longshore union leaders have held extensive contractual talks since May without news of a settlement until this minute. But U.S. Labor Secretary Marty Walsh said he sees no signs of a strike or imminent lockout.
At the other end of the Pacific Ocean stands the record trade surplus reached by China, because exports grew faster than expected, alleviating some concerns about the decline in world demand. However, China’s announcement of new military exercises around Taiwan indicates that risks persist for the maritime industry that has a major global hub and base of important shipping lines on the island.
In the midst of this scenario and with economies around the world starting to slow down even more sharply due to the war in Ukraine, the profits of the shipping lines were expected to fall back, but they are proving to be more resilient than in their recent history.
According to John McCown some of the largest shipping lines could announce better results than expected for the second quarter. Already, Maersk, the second capacity shipping line, said earlier this month that it expects a record profit of US$31 billion by 2022. Hapag-Lloyd, the world’s fifth, also announced a potent improvement in prospects for its estimated EBITDA will range from $19.5 billion to $21.5 billion. This, despite a decrease of almost 30% in spot rates registered by Drewry since the beginning of the year.
According to McCown, this is because only 10% of maritime cargo is transported under spot market terms; while the rest is mobilized under long-term contracts of one year or more. In its analysis it adds that the general tariffs of the container sector in the second quarter were 2.84 times higher than the levels measured two years before. Meanwhile, average spot rates were 4.72 times higher, while contract rates increased 2.13 times.
According to Container Trade Statistics «the financial results published by shipping lines show the impact of customers protecting their supply chains by negotiating long-term contracts» and add that «fear of supply chain congestion has meant that companies have chosen to play it safe instead of exposing themselves to the spot market».