CONTAINER SHIPPING LINES SET TO SMASH PROFIT RECORD
Marine Layer - Summer 2022
CONTAINER SHIPPING LINES SET TO SMASH PROFIT RECORD
Via AIMU Newsletter
The world’s biggest container lines are on course to post profits in 2022 that will top last year’s record by 73%, according to a new forecast, buoyed by logistics and labor strains that are squeezing capacity amid sustained US demand for imports.
Net income this year will likely reach $256 billion based on the 11 carriers monitored by industry veteran John McCown, the founder of Blue Alpha Capital. That’s an increase of $36 billion from his prior estimate in April and roughly equivalent to the gross domestic product of Portugal. The figure last year hit an all-time high of $148 billion, according to McCown.
Two years of economic disruptions have transformed an industry that carries about 80% of global merchandise trade from a perennial money loser into one of the pandemic’s most surprising financial successes. Some are investing the cash influx in new ships with cleaner-burning engines and more digital links to land-based computer networks.
The turn of fortunes, however, is fueling critics beyond the customers of ocean freight as inflation grips economies from Australia to Germany and politicians look for scapegoats. Some governments are increasing their scrutiny of shipping companies’ profits in defense of logistics workers whose livelihoods aren’t seeing a similar lift.
The container industry, where nine of the largest companies are concentrated into three alliances that share capacity on vessels, has also seen more pressure from governments for charging soaring rates while performing a service where on-time delivery tracked by Sea-Intelligence is hovering at 40%.
In July, France’s National Assembly narrowly rejected a tax on windfall profits targeting energy and transport companies. Before the vote, Marseille-based CMACGM SA - the world’s third-biggest container line — raised a rebate to 750euros ($765) from 500 euros for shipments to France from Asia and added a discount on exports amid government pressure to curb inflation on household goods In the US, President Joe Biden has blasted the container carriers - the largest of which are based in Asia and Europe. In June, he signed the Ocean Shipping Reform Act, a law passed with bipartisan support that directs the Federal Maritime Commission to prevent carriers from unreasonably refusing to fill open cargo space with US exports and investigate late fees charged by the container lines.
The International Federation of Freight Forwarders Associations, a Geneva-based organization that represents 40,000 logistics firms, said the concern isn’t only about container rates but also whether the market functions free of distortions.
“The price shocks to shippers, consumers and supply-chain intermediaries hinder recovery from the pandemic and other economic shocks in the recent past,” the group said in an emailed statement. “All affected jurisdictions globally should pay close attention through their competition authorities to ensure the market is not distorted and put in place a mechanism to intervene quickly to protect shippers and consumers worldwide.”
(Bloomberg, 8/9/2022)