It was said that the fourth quarter of 2020 was the most profitable in container shipping history. But the astonishing thing is that the profits are growing rapidly. Shipping lines profit in 2021 is estimated at around 200 billion USD.
Shipping lines profit in 2020-2021
In 2020, the nine largest container carriers tripled their earring in comparison to the previous year. In July 2021, it was said that carriers’ EBIT (earnings before interest and taxes) was to approach USD 100 billion, and average freight rates to increase by 50%. Later in 2021, the estimated number raised to an astonishing USD 200 billion. The number was corrected since one of the biggest carrier’s average rate skyrocketed by 130% compared to the same period year ago.
How is that possible? For starters, Hapag-Lloyd has raised its earnings outlook for 2021 to 12-13 billion USD. Most importantly, ONE has upgraded its fiscal year profit to about 12 billion USD. If ONE were to be used as a marker, then, as it has a market share of over 6%, the whole industry profit would approach 200 billion USD. It would mean that in 2021 alone, the maritime shipping industry would gain double the profit made in the past two decades.
Why are shipping lines growing richer?
It’s no news that ports are backlogged, and there is a shortage of boxes. Disruptions related to the pandemic effects have increased costs for shippers. Simultaneously, there is a high demand for consumer goods as the retailer’s inventories are running low. The companies are willing to pay unreasonably high freight prices to get the products shipped and later delivered to consumers.
Additional sources of income for shipowners or ways to cut expenses:
- blank sailing (cancelled sailing by the carrier or skipping ports)
- booking “additional charge”
- booking “cancellation fee”
- sudden and frequent change of sailing dates.
What lies ahead for the shipping industry?
In 2022 there will still be growth, although only half as strong as in 2020-2021. According to some estimates, the container shipping profits in 2022 will reach 300 billion USD.
The EBIT for lines is set to grow, especially since the average global pricing is estimated to increase by about 6% in 2022. The question is, when will the numbers reach a peak.