Shipping companies could sail for astonishing $ 200 billion profit this year

By Mike Wackett (The Loadstar) –

While publicly traded shipping companies have reported even better-than-expected earnings for the third quarter, their boards are once again forced to improve their earnings forecasts for the full year.

As of the third of the last quarter, carrier profits are trending even more strongly, as higher contract rates begin to trickle down to travel results and combine with the extremely high spot rates enjoyed by lines in many. trades.

Indeed, the massive estimate of $ 150 billion for the entire year that Drewry put forward just a few weeks ago already seems a little conservative.

For example, ahead of the release of its nine-month interim results on November 12, Hapag-Lloyd raised its full-year ebitda forecast by 24%, from $ 12 billion to $ 13 billion.

This follows a superb interim ebitda of $ 3.9 billion for the third quarter and a nine-month ebitda of $ 8.2 billion.

He said: “Due to the uninterrupted global demand for container transport and the persistent disruptions in global supply chains, causing a shortage of available transport capacity, Hapag-Lloyd has posted very strong financial results over the years. first nine months of 2021. “

And following ONE’s stellar second quarter result of $ 4.2 billion, announced Friday, which led it to increase its profit for the year to nearly $ 12 billion, analysts need to recalibrate their earnings expectations.

Lars Jensen, CEO of Vespucci Maritime, said the cumulative profits of the liner industry could approach $ 200 billion, which is, extraordinarily, double the profits made by carriers over the past 20 years.

The analyst used the Japanese carrier’s results as a marker and said: “ONE has a 6.3% market share and, if this were applied to its profit, it would imply an industry profit approaching $ 190 billion. dollars. “

The question shippers attending the recent multimodal show in Birmingham wanted to answer was how long freight rates would stay at levels up to 1000% higher than before the pandemic.

And while there is growing evidence that short-term rates may be falling, carriers have been busy locking shippers into very high contract rates. Indeed, according to Xeneta’s latest long-term contract rate review, October saw the 10th consecutive monthly growth in its global index, coming in at a whopping 93.1% year-on-year increase. other.

And carriers who have committed to honoring their annual contracts with shippers are now starting to see the impact of new deals at much higher prices.

ONE’s average rate climbed 130% from the same period a year ago, to $ 2,375 per teu, which is comparable to Average OOCL rate for the quarter.

The reporting season continues tomorrow, with market leader Maersk releasing its third quarter results. Analyst Jefferies expects the Danish logistics group to announce third-quarter profitability “in line” with its peers.

Jeffries said he “assumes relatively more resilient freight rates” and that “the extraordinary conditions in container shipping are likely to persist longer, until 2022”.

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