Top 30 Ocean Carriers: Riding the Profit Wave

While the industry is still reeling from the pandemic and a string of unprecedented events, profits for the top carriers have never been higher. This is a time of highly disrupted supply chains, which are exacerbated by cascading issues. Nonetheless, ocean carriers are riding a wave of unprecedented record profits.

Maersk, the world’s second largest shipping company, reported $21.7 billion in revenue in the second quarter of 2022, a 52per cent increase over the same period in 2021. Net profits for the first half of the year were $15.4 billion, a new quarterly record. 

Hapag Lloyd, the world’s fifth largest container line, reported revenues of $18.6 billion and a net profit of $9.5 billion in the first half of 2022, more than three times the previous year.

“All container carriers are seeing high profits,” said Nils Haupt, a spokesman for Hapag-Lloyd. “Due to low capacity and high demand, all carriers’ rates have been rising steadily since the second half of 2020. ” Hapag-Lloyd’s port congestion causes a 20per cent reduction in capacity . Rates rise as a result of the significantly reduced capacity.

According to Hapag-Lloyd officials, the second half of 2022 will exceed previous expectations based on current business performance. In terms of corporate profitability, Hapag-Lloyd is now regarded as comparable to Volkswagen in Germany.

According to Stefan Verberckmoes, an analyst at ocean cargo database provider Alphaliner, “liner carriers have never made so much money.”

Supply and demand

Much of that profit stems from the record-high prices that carriers have been charging for containers. Simply put, it’s a result of supply and demand, which hasn’t always been the case in the ocean shipping industry.

“Historically, carriers have always operated with an adequate number of ships,” says Verberckmoes. “However, with the pandemic, the industry experienced its first shortage.”

The industry is still reeling from the pandemic’s aftermath, which included a sudden shortage of ships, port congestion exacerbated by China’s zero-COVID policy lockdowns, labour shortages and union disputes at terminals, and inland transportation bottlenecks. According to Drewry, these disruptions removed approximately 10% of the market’s ocean capacity, resulting in container shortages and high container rates.

Some carriers responded by placing large orders for containers. For example, Hapag-Lloyd ordered 150,000 TEUs of new dry and reefer boxes, as well as 8,000 TEUs of special containers, in April 2021. It was the company’s largest investment in boxes ever, costing $550 million.

However, there is currently an oversupply of containers. The global pool of shipping containers increased by 13% to nearly 50 million TEUs in 2021, according to Drewry, but the industry now has a global surplus of 6 million TEUs.

Rates are also falling. According to Freightos, the cost of shipping a container from China to the United States in June 2022 was $9,500, which was half the $20,000+ price tag ten months earlier—but still four times higher than the $2,500 rate in June 2020.

“We knew extreme freight rates and profits were unsustainable,” says Philip Damas, managing director of Drewry Supply Chain Advisors. “The only question was when the market would turn, and then how quickly it would normalise.” We continue to believe that the decline in high rates and carrier profits will take time.

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