Can ocean shipping break last year’s record profits?
Soaring contract rates for shipping lines in 2022, along with ongoing port congestion. Liner shipping is set to smash last year’s record profits by as much as 72.9%.
Net profit could hit $256 billion this year, a figure roughly equal to Portugal’s gross domestic product (GDP), according to data from 11 operators monitored by Blue Alpha Capital. Liner shipping made a record $148 billion in profits last year.
Global supply chains are expected to remain tight in the coming months. Port congestion at key locations remains widespread, while British consultancy Drewry is also forecasting record cruise profits this year, totaling $270 billion. But Drewry expects profits to fall sharply next year.
Maersk, the world’s second-largest container shipping company, revealed earlier this month that it expects a record full-year profit of $31 billion. In Germany, Hapago-Lloyd is even more profitable than Volkswagen, making it the most profitable company in the country.
Rising contract freight rates and continued congestion in the second half of the year will help cushion the impact of weaker spot freight rates.
The process of normalizing demand and easing congestion may be slower than expected, which is positive for ocean container shipping profitability in 2H22. Looking ahead, we believe that after years of consolidation and the formation of large shipping alliances, shipping companies have learned the rules of capacity, and while freight rates may still fluctuate, the lowest freight rates of the past 10 years may not be sustainable in the future.
Under current market conditions, most of this year’s shipping season has been brought forward to spring. Combined with lower demand due to inflation and changes in consumer spending, the economy appears to have started to shift towards normalisation, but it will be a gradual process as demand remains strong and traffic congestion continues to weigh on capacity.
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