The globe Shipping industry gets its biggest payday since 2008 as the combination of booming demand for goods and a global supply chain collapsing under the weight of Covid-19 drives freight prices higher and higher.
Whether giant container ships piled high with 40-foot steel boxes, bulk carriers whose caves hold thousands of tons of coal, or special ships designed for cars and trucks, the revenues for ships of almost all kinds are exploding.
Since the merchant fleet handles around 80% of world trade, the increase extends to every corner of the Business. The 2008 boom brought a huge wave of new ship orders, but the rally was quickly undone by a collapse in demand as a financial crisis sparked the deepest global recession in decades.
The reasons for this boom are twofold – an economic reopening after Covid, which has boosted increasing demand for goods and raw materials. In addition, the virus continues to disrupt global supply chains, clog ports and delay ships, limiting the number of goods available to move goods across the oceans. The majority of the shipping industry has thus achieved record profits in the past few months.
The gold mine revolves around container shipping – where rates keep climbing to new records, but it’s by no means limited to that. the Shipping industry according to Clarkson Research Services Ltd., part of the world’s largest shipbroker, the strongest daily result since 2008. The only laggards are the oil and gas tanker markets, where further declining forces are at play.
“I’m not sure if the perfect storm will cover it all – that’s just spectacular,” said Peter Sand, senior shipping analyst at the Bimco trading group. “It’s a perfect spillover of a scorching container shipping market onto some of the other sectors.”
Container shipping remains the star. It now costs $ 14,287 to move a 40-foot steel box from China to Europe. That is more than 500% more than a year earlier and drives up the costs of transporting everything from toys to bicycles to coffee.
Those gains can already be seen in the profits of AP Moller-Maersk A / S, the world’s largest container line, which increased its estimated profit this year by nearly $ 5 billion last month. As a sign of how profitable the industry has become, CMA said CGM SA – the world’s third largest airline – is freezing its spot rates to preserve long-term customer relationships. In other words, the company is distracting profits.
While demand for merchandise is boosting container markets, one is recovering global business also ransacked more raw materials and increased the revenue of bulk carriers carrying manufactured goods. Earnings in this sector recently hit an 11-year high and are showing little sign of slowing down as consumption is expected to remain stable for the remainder of the year.
“Strong demand for natural resources combined with Covid-related logistical disruptions” support spot and future freight rates, said Ted Petrone, vice chairman of Navios Maritime Holdings, which owns a fleet of bulk carriers, on a conference call last week. “The fundamentals of supply and demand will remain extremely positive in the future.”
The extreme strength of shipping is so great that some bulk carriers have even moved to carry containers on their decks. Golden Ocean Group Ltd. belongs to the companies that are dealing with the idea. While it could bring additional profits to owners in an already unexpected year, it is not without risks as bulk carriers are not designed to carry the giant boxes.
“It tells a story about the special situation we find ourselves in,” said Ulrik Andersen, CEO of Golden Ocean, earlier this month in the container market.
While Covid boomed many shipping sectors, for oil tankers it meant loss-making businesses and owners effectively subsidizing the shipping of crude oil for much of 2021.
With OPEC + still keeping some of the supply offline, there are too many ships and too few cargoes, which is keeping revenue down. That burned one of the hottest trades in the industry earlier this year – bullish oil tanker positions in hopes of a summer surge in oil demand.
In view of falling oil stocks on land, analysts continue to expect a recovery. Interest rates could rise in October as inventories dwindle and demand for tankers rises, Pareto Securities analysts, including Eirik Haavaldsen, wrote in a statement to customers.
But for the time being, the tanker market remains the only eyesore for an industry in which freight capacities are becoming increasingly scarce. The ClarkSea Index, which tracks daily earnings across a variety of shipping sectors, has seen its longest monthly gains on record.
These record profits are also seen in more esoteric markets. Car transporters have been the most expensive to rent since 2008. The prices for general cargo ships with heavy equipment are also rising, contributing to a boom led by container and bulk carriers.
“The charter rates reported in containers are insane and the same goes for bulk cargo,” said Alexandra Alatari, shipping analyst at Arrow Shipbroking Group. “The fundamentals are strong enough to support interest rates, which would be the high point of any other year.”