- After cumulative ocean carrier profits exceeded some $9bn for the final quarter of 2020, the returns for the liner industry could double that in Q1 this year.
- Cosco Shipping expects its Q1 net profit would reach a massive $2.3bn.
- This is in comparison with just $44m for the same period a year ago, after Cosco Shipping average freight rate leapt 54% quarter on quarter.
- Carriers are also reducing the MQC (minimum quantity commitment) on contracts in order to allocate more space for even higher-paying spot and premium business.
A recent Loadstar article by Mike Wackett brings forth that container carrier profits on course to extend for a further two years.
Drewry on container shipping market
Maritime consultant Drewry agreed and said the container shipping market “had never been so hot”, the industry now in “unchartered waters” on the crest of an unprecedented business up-cycle.
It argued that carriers were “set up nicely for at least another two very profitable years”.
While the huge freight rate inflation in the second half of last year was caused by a consumer consumption driven shift to goods during the pandemic, together with supply chain disruption and restricted capacity, the “return to normal keeps getting pushed back”, noted Drewry.
A picture of 2022
For 2022, although Drewry expects to see some erosion in freight rates, it still thought that carriers would manage to stay “highly profitable” due to “favourable supply and demand growth trends alongside skilful capacity management”.
Thereafter, the picture appears to be less certain, given the recent rush to order new tonnage that will start hitting the water in the next two to three years.
Risk behind the prolonged upcycle
These ships are being ordered as if they are for today, not what the market will look like when they are ready for delivery.
Owners are risking paying top dollar for assets that will potentially end the container upcycle.
It warned that if the acceleration of ship orders continued, there was a risk of a return to overcapacity that will shorten the cycle.
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Source: The Loadstar
