Shipping Lines Could Be Sailing Towards Astonishing $200 Billion Profit This Year
With stock market-listed ocean carriers reporting even better-than-expected profits for the third quarter, their executive boards are being forced yet again to upgrade full-year earnings forecasts.
A third of the way through the final quarter, carrier profits are trending even stronger, as higher contract rates begin to filter through to voyage results and combine with the sky-high spot rates lines are enjoying across many trades.
Indeed, the massive industry-wide $150bn full-year estimate Drewry posited just a few weeks ago already appears a tad conservative.
For example, ahead of publication of its nine-month interim result, on 12 November, Hapag-Lloyd has upgraded its full-year ebitda guidance by an eye-watering 24%, to $12bn to $13bn.
This follows a stunning provisional ebitda of $3.9bn for Q3 and a nine-month ebitda of $8.2bn.
It said: “Due to unabated global demand for container transport and the continuing disruptions in global supply chains, causing a shortage of available transport capacity, Hapag-Lloyd posted very strong financial results in the first nine months of 2021.”
And following ONE’s stellar result for its Q2 of $4.2bn, announced , leading to it upgrading its fiscal year profit to nearly $12bn, analysts are having to recalibrate their earnings expectations.
Lars Jensen, CEO of Vespucci Maritime, said the cumulative profit for the liner industry could be nearer to $200bn – which is, extraordinarily, double the profit made by carriers in the past 20 years.
The analyst used the Japanese carrier’s results as a marker, and said: “ONE has a market share of 6.3% and, if this were applied to its profit, it would imply an industry profit approaching $190bn.”
The question shippers attending the recent Multimodal exhibition in Birmingham wanted answered was how long freight rates would remain at levels of up to 1,000% higher than pre-pandemic.
And while there is mounting evidence that short-term rates may be waning, carriers have been busy locking shippers into vastly elevated contract rates. Indeed, according to the latest Xeneta long-term contract rate review, October saw the 10th consecutive month-on-month growth in its global index, to stand at a huge 93.1% year-on-year increase.
And carriers committed to honouring their annual contracts with shippers are now beginning to see the impact of new much higher-priced agreements.
ONE’s average rate soared by 130% on the same period a year ago, to $2,375 per teu, which is on a par with OOCL’s average rate for the quarter.
The reporting season continues tomorrow, with market leader Maersk publishing it Q3 results. Analyst Jefferies expects the Danish logistics group to announce Q3 profitability “in line” with its peers.
Jeffries said it was “assuming relatively more resilient freight rates” and that the “extraordinary conditions in container shipping will likely persist for longer, well into 2022”.