Ocean Carriers are expected to make a record profit of $100 billion

3 mins read  Sealuminati TeamJuly 9, 2021

Drewry believes that 2021 will be the first year in the history of container shipping when carrier revenues reach $100 billion. Freight rate increases of 50% are driving the remarkable gains, which will be obtained despite harbor congestion and prolonged container scarcity.

The total throughput of global ports is expected to reach 873 million twenty-foot equivalent units (TEU), up 10% from the previous year. It expects EBIT to fall by about a third in 2022 owing to weakening freight prices and rising expenses, which may remain higher for longer as many carriers lock in expensive longer-term charter arrangements.

Drewry said, “In this year's prediction, we expect industry profits before interest and taxes (EBIT) to be about $80 billion, up from our prior estimate of $35 billion. If freight rates exceed projections in the second part of the year, we wouldn't be surprised to see an annual profit line of about $100 billion”.

Spot rates and contract prices continued to climb, resulting in new highs inbox shipping costs. The situation isn't looking to improve any time soon, as growing supply-chain disruption continues to drive up prices every week.

“On most lanes, we are now accustomed to seeing triple-digit yearly increase rates for spot prices. The fact that these occurrences are no longer surprising is more confirmation, if required, that the market is absolutely insane right now,” Drewry remarked.

Extreme gains in freight prices have inevitably translated into record carrier profits, with shipping lines reporting a record EBIT of $27.1 billion in the first quarter, up from $1.6 billion the year before. The current quarterly results were so good that they even outperformed the $25.4 billion EBIT for 2020.

Read here- Cost To Ship A Container From China To US Jumps To $10,000, Sees A 229% Rise From Last Year

Container volumes are projected to climb during the third quarter peak season, according to Drewry's projection, and conclude the year with an annual growth rate of around 10%. As COVID-related limitations are eliminated, growth is likely to slow next year.

“Due to recent cautious newbuild contracts, we estimate the cellular fleet to only grow by 4.2% in 2021 and 2.8% in 2022, both substantially less than world port throughput projections,” Drewry explained.

High levels of newbuild contracting for 2023pose a risk of overcapacity returning to the market, even though future supply requirements are heavily clouded by new environmental regulations set to take effect at the start of 2023, according to the industry consultancy.

Following an 11% drop last year, He estimates that 16% of global effective capacity will be lost this year as a direct result of poorer port productivity.

The major components needed to repair the supply chain and get containers moving as they should," Drewry summarised port efficiency had to increase and liner services had to be "more dependable and predictable," the two "going hand in hand."

“A slowdown in Asia-to-US demand is required to encourage more equal capacity and equipment distribution” he added.