Container carriers are poised to turn in an incredible $300bn profit this year ‘dwarfing’ anything the industry has ever seen before.
Bottlenecks driving high freight rates are unlikely to be solved this year and set to continue into 2023, according to UK-based container analyst Simon Heaney.
He said macroeconomic sentiment had tilted to the downside as the war in Ukraine and lockdowns in China could choke demand.
But more disruption-driven freight rate gains would more than compensate for higher costs and deliver even higher profits in 2022.
“Slowing growth is a concern, but as long as there is growth the party should keep on going for carriers,” Heaney, a senior manager at Drewry Shipping Consultants, told a webinar.
“In today’s stressed container market, such are the capacity constraints that rates can stay high even though headline demand growth is falling.”
Mounting headwinds
Drewry’s upgraded earnings forecast for the liner sector comes on top of an Ebit profit of $214bn in 2021, brought about by the chaos brought about by the pandemic.
It comes as AP-Moller Maersk today updated its Ebitda profit guidance by 25% to $30bn.
However, the Danish shipping giant made a nod to the potential downside by downgrading its forecast of global demand growth this year, from 2-to-4% to -1-to +1%.
Covid and Ukraine could create a firebreak in container demand that will speed the container supply chain recovery, Heaney said.
If that happens prices come down swiftly and that could lower profits.
But the supply of container ship capacity to the market is not expected to reach anywhere near its full potential for another year.
So supply chain recovery will not be resolved this year but was likely to extend into 2023.
“That’s going to mean at least another of 12 months of lengthy delays and high freight rates,” Heaney said.
Average freight rates are expected to be 39% higher in 2022. That comes on top of the 110% hike in 2021, based on a mix of contract and spot rates.
Port congestion at Chinese ports remains elevated with waiting times at Ningbo rising to up to seven days, according to analyst Linerlytica.
Shanghai wait times have fallen to less than two days as cargo volumes have been significantly curtailed.
The number of container ships in port stands at near-record levels.
Some 37% of capacity is waiting at ports as of mid-April, up from a pre-Covid average of 31%, according to Clarkson Research estimates.
