In recent years, consolidation in the global container shipping industry has been a primary factor in improving supply discipline.
As a result, the financial performance of ocean freight carriers has improved dramatically.
In 2020, the largest companies reduced their available shipping capacity by more than 13%, in order to meet a drop in global demand due to COVID-19 (Fitch, 2021).
Three of the largest container shipping companies, Maersk, CMA CGM and Hapag Lloyd, reported strong results at the end of the year.
In addition, its EBITDA grew thanks to higher freight rates, despite lower revenues due to the reduction in transported volumes. Trans-Pacific rates have benefited from higher volumes since June 2020, driven by restocking, higher demand for personal protective equipment, and inventory growth ahead of the holiday season to cover potential outages.
The risks remain
Monroe Consulting President Jon Monroe specifies that the container shipping industry has historically been among the most volatile of all global shipping sectors.
Despite recent improvements, it should be noted that there are still significant downside risks.
Monroe claims that the decline in demand for shipping, particularly on trans-Pacific routes due to trade tensions between the US and China and the localization of the supply chain, the growth of e-commerce that often uses air freight, the weak global economic conditions, resistance to the rise.
Freight rates and supply discipline from shipping companies can put the industry under further pressure.
He notes that reserves continue to grow and equipment is in short supply. Carriers are responding by skipping smaller ports and limiting movement to inland locations, as well as inland export stocks.
Source: Logistics Management