- 2022 will be a record year for container shipping companies. We anticipate a +19% year-over-year increase in the sector’s revenue and an increase of +8% in operational cash flow. Despite a -32% decrease year-to-date, freight charges are still significantly higher than the pre-pandemic norm (USD6,400/forty-foot box vs. USD1,450/forty-foot box). Given the delayed delivery of new vessels, new rules on CO2 emissions, ongoing truck driver shortages, and rising prices for fuel, containers, and vessels, freight rates are anticipated to remain high in 2023 (USD 4,550/forty-foot box).
- Higher-than-expected cash generation has helped liners comply with new ESG standards (with investments growing by +61% y/y in 2021). Additionally, gross debt decreased by -5% year over year in 2021, and we anticipate that companies will continue to reduce their debt in 2022 and 2023 (by -16% and -11%, respectively), which will be critical given the rise in interest rates.
- However, despite increased capital expenditures (CAPEX), shipping capacity will not increase as much as expected nor as fast as desired. The sector’s capacity has not been met by the previous investment efforts, despite its size (cash from operations increased by +274% on average in 2021), and the majority of the CAPEX rise is justified by the fact that the cost of new vessels doubled last year rather than by larger new orders. Furthermore, because of IMO 2023 restrictions that require businesses to retire older ships, these ships are likely to update the fleet rather than completely increase it, even if 35% of orders should be delivered in 2023 and 39% in 2024.
Freight rates will not return to pre-pandemic levels in the short term
The worldwide container shipping industry, which saw a nearly doubling of revenues in 2021, is on track to have another record year as freight rates continue to rise. The average annual revenue growth rate for the international shipping industry, measured using a sample of 30 companies, was +70% in 2021, amounting to over USD11 billion per company. The average net profit was USD3.5 billion, which is extraordinarily high for a sector that has struggled to break even over the previous five years.
Average revenue and operating cash flow (OCF) of the global industry (USD mn)
These record results were influenced by both volume and prices, but the growth engine has always been and will continue to be freight rate. Global commerce of goods increased by +9.8% y/y in volume in 2021 (as opposed to a decline of -5.0% in 2020 and a pre-pandemic average pace of +1.6%); in the previous 12 months, the volume increased by +5.0%. Prices increased dramatically as a result of the economy’s faster-than-anticipated recovery, which led to a record rise in shipping demand and an astounding +113% increase in freight rates by December 2021. They reached a record-breaking high of USD10,377 per forty-foot box in September 2021. (the pre-pandemic average was around USD1,450 USD/forty-foot box).
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