Uncertainty delivers ‘best year ever’ for liner shipping

“Best start to shipping year since records began,” is a catchy headline.

Clarksons Research has only been collecting statistics in this form for 30 years, but it’s quite an achievement.

While some industries are still struggling to ignore the impact of Covid-19, much of the maritime world is basking in new adulation.

Maintaining global trade during the worst of the pandemic lockdowns has led to increased revenues – for shipping in particular – throughout 2020.

A massive rebound in global trade last year then triggered powerful logistical snags that helped push up ocean freight rates.

It was amazing to see 2021 produce the highest annual average for the ClarkSea Index – at $28,700 – since the peak of the global economy before the crash of 2008.

The article continues below the ad

Now, the first 15 weeks of 2022 have pushed this index up to an average of $36,507 – and hit close to $40,000 on some occasions.

It was no surprise to hear container giant AP Moller-Maersk report this week that Ebitda profits in the first quarter of this year reached $9 billion.

And after recording what is thought to be the biggest ever profits for a shipping company of $24 billion in 2021, the Danes are now expecting $30 billion for 2022.

Port congestion

Last week, Hong Kong’s Orient Overseas container line posted more record first-quarter revenues, despite lower lifts due to congestion.

And that will only spur the US Federal Maritime Commission, which is still trying to establish whether the liners they believe are doing enough to help US exporters or whether they are engaging in anti-competitive behavior.

Port congestion, which has helped inflate freight rates, has eased recently on the US West Coast, but appears to have worsened on the East Coast.

It is not just container shipping that is attracting investor interest. Analysts at Clarksons investment bank, Clarksons Platou Securities, report that the stock price of publicly traded tanker and bulk carrier companies has soared more than 40% this year, making shipping the “beauty of the ball – outperforming all other industries.

In fact, the only segment of the shipping stock market that hasn’t performed so well in recent months is container companies, but that’s because their value was already so high.

And there are also fears that line trades are now slowing down. Freight rates have fallen and this has been factored into Maersk’s target of $30 billion in profits in 2022.

Slowdown in China

The tough new Covid lockdowns in Shanghai – the world’s largest port – have spooked shipping but also wider capital markets.

The FTSE 100 index of major London stocks fell 2% on Monday amid fears the world’s second-largest economy could be dragged into recession. Oil prices have stabilized closer to $100 a barrel since peaking at $140 a barrel in early March.

There has been a significant drop in export volumes from the “workshop of the world” and port congestion has resulted in the re-routing of Maersk and other liner ships.

It has also led Maersk, Mediterranean Shipping Co and others to ‘cancel’ some east-west sailings.

There is also the ongoing war in Ukraine, which has changed trade patterns and disrupted shipping amid Western sanctions.

German line operator Hapag-Lloyd says the global transmission line market will “normalise” in the second half of 2022.

But shipping consultant Drewry predicted that global supply chain problems and port congestion will continue into next year.

And business consultancy McKinsey thinks high freight rates will continue through 2024. The future is hard to predict.

Despite constant warnings about the potential for black swan events, few expected Russian President Vladimir Putin to send tanks over the border into Ukraine or predict the timing or scale of the pandemic. of Covid.

The big win for shipping has been relatively little supply-side self-harm in the years following the financial crash of 2008 through excessive orders for new tonnage.

Yards have filled rapidly over the past 24 months with a particular rush on mid-size container ships of around 7,000 teu.

But it will take time for these to come down the slipway and impact the supply/demand balance. For now, shipowners can afford the best start to the year ever recorded.