Carrier boom to continue for at least another two years

Carrier boom to continue for another two years

The boom in container shipping liner profits could continue for another two years, with port congestion and container equipment shortages an ongoing hinderance to operations for most of 2021, according to Drewry Shipping Consultants.

The company said in its report on 9 April 2021 that while it predicts freight rates will drop in 2022, carriers will continue to see revenues and earnings increase thanks to “favourable supply and demand growth trends, alongside skillful management”.

“With higher contracts rates locked in, another highly profitable year is virtually guaranteed,” Drewry said, and predicted the industry will “re-set profitability records once again in 2021”.

Many of the world’s biggest container shipping lines, including A.P. Moller-Maersk, MSC, Hapag-Lloyd and ZIM International, have seen their earnings soar since the beginning of the COVID-19 pandemic thanks to high freight rates and low bunkering prices.

Describing the present market situation as “unchartered waters”, Drewry said historical measures cannot be applied and  the container shipping industry will not “cool down” as fast as it has done in the past.

The driving factors have been e-commerce and the demand for consumer goods, such as home office and fitness equipment. While carriers have enjoyed substantial revenue booms, ports around the world have struggled to cope with the ensuing congestion.

This has been particularly bad on the US West Coast, where the biggest gateways for US-China trade have seen their throughputs hit record levels for several consecutive months. Consequent supply chain disruption has further reduced port productivity and restricted capacity from the market.

These trends, Drewry predicts, will pass and when they do the market will be in “for a sobering reality check”.

“However, these factors are stubbornly refusing to go away and the timeline for a ‘return to normal’ keeps getting pushed back.

“Port congestion and container equipment shortages will remain an unwanted feature throughout most of 2021, albeit lessening in degree as months pass.

“This will further restrict the availability of capacity and lead to substantially higher average spot and contract freight rates.”

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