The container sector is setting sail for its best year ever with super high profits for all. And carriers are working hard to secure that 2022 will also deliver extraordinary profits. When a market is this strong, everyone is making money, even the ones with the lowest level of customer services attached to its ocean transportation products.
What’s happening?
The robust profits container lines reported in the third quarter, the best in a decade, stand in stark contrast to dismal service levels and worsening container imbalances out of Asia that comes with the sting of rates that have hit record levels in the trans-Pacific and six-year highs on Asia–Europe trades.
With rates up significantly compared with last year, and bunker prices down year over year, the carriers managed to shrug off growing supply chain disruption in the third quarter to report a slew of highly positive results.
Maersk Line, the largest container carrier by fleet capacity and a financial bellwether for the industry, reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.3 billion in the third quarter, an increase of 39 percent compared with the same three-month period in 2019. CMA CGM grew its EBITDA 68 percent year over year to $1.7 billion for the quarter, Hapag-Lloyd increased its EBITDA 17 percent to $768 million, Zim Integrated Shipping Services reported an incredible 145 percent growth in earnings to $262 million, and Ocean Network Express saw its EBITDA surge 78 percent to $872 million. While Yang Ming did not provide an EBITDA figure, the Taiwan-based carrier posted an operating profit of $230 million in the third quarter compared with a $38 million loss in the same quarter last year.
Following the carriers’ solid Q3 results, Sea-Intelligence Maritime Analysis is expecting the industry to achieve an operating profit of $14 billion for the full year, while Drewry last month upgraded its operating profit expectation for container shipping in 2020 by 16 percent to $11 billion, a level not seen since 2010.
But even as carriers head for their most profitable year in a decade, frustration is building among their customers that are finding space in short supply, a lack of equipment, and global schedule reliability that in the third quarter tumbled to 65 percent, down almost 15 percentage points year over year.
To cover the sustained high volume on both the trans-Pacific and Asia–Europe trades, carriers have thrown all available capacity into the water, but the demand has quickly filled all vessels and is overwhelming terminals in the United States, Europe, and the UK. Shippers are facing lengthening port delays, cargo rollovers, soaring rate levels, and an array of equipment and congestion surcharges.
‘Prepare accordingly’
Containers were already left out of position during the extensive blank sailings program implemented during COVID-19 lockdowns in the second quarter, and the extreme rebound in demand since economies in Europe and North America reopened in June blindsided the capacity-cutting carriers.
“Everyone has been surprised by the cargo rebound and that is why a lot of the supply chains are under pressure,” Rolf Habben Jansen, CEO of Hapag-Lloyd, told JOC.com in an interview. “It is difficult for the terminals, for the truckers, there are not enough chassis, we can’t find enough ships, boxes are tight. Everyone is affected by this problem at the moment.”
Søren Skou, CEO of A.P. Møller-Maersk, said a stronger-than-expected recovery in demand following the slowdown in April and May led to the reactivation of all available tonnage, with Maersk reporting a 96 percent utilization of its fleet for the third quarter.
CMA CGM said the volume momentum that built through the third quarter had continued into the last quarter, and the carrier’s fleet was operating at full capacity.
