LOSS-SUFFERING smaller ocean carriers that were unable to generate economies of scale in the years before Covid-19 have joined their bigger rivals in the black as industry operating profits top US$42 billion in the first half of 2021, according to Sea-Intelligence Maritime Analysis.
Double-digit increases in volume were reported by all carriers and accompanied by a huge increase in the profitability per container transported through the second quarter. In the same period, operating profit, or earnings before interest and taxes (EBIT), of the top 13 carriers hit $24.5 billion after making $17.6 billion in Q1, reports IHS Media.
To place that figure in context, Sea-Intelligence wrote in its latest Sunday Spotlight newsletter that the combined industry operating profit in the years 2012 to 2020 was just $6.9 billion.
The staggering level of profitability through the second quarter has its roots in both demand and elevated rates. Average Asia-US West Coast rates valid for 30 days or less in the second quarter stood at $4,200 per FEU, more than four times the average second quarter rate in pre-pandemic 2019, according to rate benchmarking platform Xeneta. The average China-North Europe spot rate in the second quarter was $4,771 per TEU compared to $736 per TEU in 2019.
As freight rates hit those record levels on the major east-west trades, the EBIT per container reported by the top 13 carriers was between $500 and $1,300 per TEU, compared to the highest EBIT per container recorded in the decade between 2010 and 2020 of $291 per TEU.
'This is an absurd amount of money the shipping lines are currently making, the likes of which have never been seen,' Sea-Intelligence wrote in the newsletter.
That medium-sized carriers were now able to share in the profit taking was another surprise, the analyst noted. In the pre-pandemic years, carriers at the top end of the 13 largest shipping companies - Maersk, CMA CGM, Hapag-Lloyd, and OOCL - were consistently growing revenue, volume, and profit. However, down at the other end, the smaller carriers such as Yang Ming, HMM, and Zim Integrated Shipping Services and were racking up losses and losing market share.
Zim aggressively expanded its ocean services on the high-demand trans-Pacific, where North American demand for Asian goods has outpaced supply since last summer, pushing up spot rates to record levels and enabling Zim to sign trans-Pac service contracts at rates 50 per cent higher than a year ago.
Yang Ming only returned to profitability in the third quarter of 2020 after posting losses every quarter for the previous two years, while HMM returned to profitability in 2020 and extended that momentum through the first half of this year.
Before Covid-19, Sea-Intelligence said the mantra 'big is better' seemed to be a forgone conclusion, but this dynamic has shifted through the pandemic with the medium carriers riding the buoyant market to join their bigger peers in record earnings territory.
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Double-digit increases in volume were reported by all carriers and accompanied by a huge increase in the profitability per container transported through the second quarter. In the same period, operating profit, or earnings before interest and taxes (EBIT), of the top 13 carriers hit $24.5 billion after making $17.6 billion in Q1, reports IHS Media.
To place that figure in context, Sea-Intelligence wrote in its latest Sunday Spotlight newsletter that the combined industry operating profit in the years 2012 to 2020 was just $6.9 billion.
The staggering level of profitability through the second quarter has its roots in both demand and elevated rates. Average Asia-US West Coast rates valid for 30 days or less in the second quarter stood at $4,200 per FEU, more than four times the average second quarter rate in pre-pandemic 2019, according to rate benchmarking platform Xeneta. The average China-North Europe spot rate in the second quarter was $4,771 per TEU compared to $736 per TEU in 2019.
As freight rates hit those record levels on the major east-west trades, the EBIT per container reported by the top 13 carriers was between $500 and $1,300 per TEU, compared to the highest EBIT per container recorded in the decade between 2010 and 2020 of $291 per TEU.
'This is an absurd amount of money the shipping lines are currently making, the likes of which have never been seen,' Sea-Intelligence wrote in the newsletter.
That medium-sized carriers were now able to share in the profit taking was another surprise, the analyst noted. In the pre-pandemic years, carriers at the top end of the 13 largest shipping companies - Maersk, CMA CGM, Hapag-Lloyd, and OOCL - were consistently growing revenue, volume, and profit. However, down at the other end, the smaller carriers such as Yang Ming, HMM, and Zim Integrated Shipping Services and were racking up losses and losing market share.
Zim aggressively expanded its ocean services on the high-demand trans-Pacific, where North American demand for Asian goods has outpaced supply since last summer, pushing up spot rates to record levels and enabling Zim to sign trans-Pac service contracts at rates 50 per cent higher than a year ago.
Yang Ming only returned to profitability in the third quarter of 2020 after posting losses every quarter for the previous two years, while HMM returned to profitability in 2020 and extended that momentum through the first half of this year.
Before Covid-19, Sea-Intelligence said the mantra 'big is better' seemed to be a forgone conclusion, but this dynamic has shifted through the pandemic with the medium carriers riding the buoyant market to join their bigger peers in record earnings territory.
SeaNews Turkey
