Container Shipping Profits To Fall by 80%


After two years of unprecedented rise, container freight rates were expected to peak in a downward cycle of oversupply in 2023-2024. But Parash Jain, HSBC’s head of shipping, ports and transport research in Asia, doesn’t see a return to the deficits that have often characterized the sector in the past two decades before the pandemic, reports Tumsolzluk.

Widening gap

“There are indications that the widening gap between supply and demand (as seen in the BDI) could lead to a rapid decline in spot rates to pre-pandemic levels, while contract rates remain at pre-pandemic levels. capacity discipline will be maintained beyond the spot rate by staying at the trough level,” Jain said.

He said earnings will decline from an estimated peak in 2022, but are still better in the past.

The significant drop in rates from current levels is caused by the mismatch between container growth and new vessel supply. HSBC forecasts that global container trade will decline by 2% in 2022, 3% in 2023 and recover 2.5% in 2024. In contrast, vessel capacity will increase by 6.2% in 2022, and 6.5% and 8% in 2023 and 2024, respectively.

HSBC said it expects the sector to bottom out in 2024, noting that its forecast for 2023-24 is well below consensus. Despite lower earnings forecasts, HSBC maintains purchases of two container shipping stocks, Maersk and SITC.

“By 2024 (the year of this downcycle trough), Maersk will return just over 50% of its market capitalization to shareholders, with non-offshore businesses contributing 44% of its operating profit, making it a less cyclical business. We think it will be appreciated,” the report said.

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Source: Tumsolzluk