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2022 carrier profits primed to hit $200 billion

Algeciras, Cadiz Spain; 20 January 2022: A MSC freighter is docked on harbor, Container ship at industrial port in import export business logistic and transportation of international
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Container demand growth is losing momentum, but carriers are expected to bring in $200 billion in profits for 2022, forecasts Drewry.

In its latest Container Forecaster report, Drewry anticipates that ocean carriers will ride a third year of 15 per cent or higher in annual growth of total revenue in 2022.

Simon Heaney, Senior Manager of Container Research, wrote that global carrier industry sales are expected to exceed $500 billion for the first time.

The gravy train kept on rolling for ocean carriers in 3Q21 as the industry once again exceeded Drewry’s expectations, Heaney wrote. Shipping lines posted an estimated EBIT performance of $70.9 billion – a nine-fold improvement from $7.6bn in the same quarter a year ago.

Drewry again upgraded its annual operating profits forecast for 2021 from the previous guidance of $150bn to $190bn, at a margin of approximately 43 per cent.

The pandemic and ensuing supply chain crisis is the primary driver of the “supercharged carrier profits and share price bonanza,” Heaney wrote. “In simple terms, the longer the congestion lasts, the longer that freight rates and carrier profits will stay extremely high.

“We think that 3Q21 probably represents the peak quarterly earnings for carriers, but that quarterly results in 2022 will stay on a more even keel that will average out slightly higher. Our revised estimate for this year now stands at $200 billion (margin 37 per cent).”

Carriers are building significant free cash flow that will give them “ample room” to allocate future income to dividends, pay down debt, and pursue growth opportunities, Heaney wrote.

Lines are already beginning to expand portfolios with the extra free cash flow: in December, MSC made a $6.4 billion offer to acquire Bolloré Africa Logistics. The same month, A.P. Moller – Maersk (Maersk) reached an agreement to acquire LF Logistics, a Hong Kong-based contract logistics company in the Asia-Pacific region.

The sky-high earnings for carriers have drawn the attention of regulators – notably earlier in Autumn last year year following a new executive order signed by the Biden administration to crack down on anticompetitive behaviour in rail and ocean shipping industries.

Containers

Fast rising inflation, ongoing supply chain bottlenecks and the Omicron COVID-19 variant are conspiring to slow the pace of growth in container handling, forcing Drewry to lower its year-on-year outlook for world port throughput in 2022 to 4.6 per cent.

The full-year 2021 estimate was also downgraded to 6.5 per cent, from 8.2 per cent.

Full-year 2022 estimates will reach just shy of 900 million TEU in global throughput – although this data is subject to change.

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