Box shipping lines' yearly profits are expected to approach US$100 billion in 2021 for the first time in the history of container shipping, according to the latest forecast by Drewry, while freight rates will be skyrocketed by 50%, despite the important operational disruptions to ports across the world and the global supply chain.
This forecast does not come as a surprise, as we have already seen the vast majority of the major ocean carriers report record profits and earnings in their quarterly results.
"The extreme increases in freight rates have naturally translated into blockbusting carrier profits," said Drewry. "Carriers posted a record EBIT result in 2021 first quarter of US$27.1 billion, up from what now looks a miniscule US$1.6 billion in the same period one year ago. So impressive are the latest quarterly results, they even eclipsed the full-year 2020 EBIT of US$25.4 billion".
Drewry Shipping Consultants expect average freight rates across global trades to rise by around 50% in 2021, an uplift of as much as 30% on their March forecast, indicative of the acceleration in pricing seen already through the first half of the year.
In addition, Drewry estimates that 16% of worldwide effective capacity (the slots available to the market) will have been lost this year as a direct consequence of lower port productivity, following on from an 11% reduction last year.
"In an alternative reality when Covid-19 did not damage port operations and productivity was maintained at 2019-levels the Global Supply-Demand Index would have averaged only 84.0 in 2020 and 89.0 this year," commented Drewry.
That timeline is not seeing the record freight rates and carrier profits we are experiencing, according to the UK shipping consultants.
Drewry believes that even if carriers do revert to type and the current newbuild craze ends the upcycle in 2023, they will have made so much money between 2020-22 that they will be set up for years to come. "They could potentially make as much profit in this window as they could have hoped in a decade, or more," pointed out the consultants.
"Carriers’ only account in deficit is public relations," added Drewry. "With increasing attention on shipping’s environmental footprint and tax contributions, lines are in danger of being cast as profiteering villains, unsympathetic to the needs of their customers.
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