Shipping line profits just keep growing

The operational efficiency of shipping lines are reaching dizzying levels, with the leading carriers generating an average operating margin of 57.4%, versus an average of just -0.2% in the decade preceding the pandemic.

All carriers reported higher margins in the latest quarter, compared to 55.6% in the third quarter of 2021, with Taiwan’s Evergreen achieving the highest operating margin of 68.6%.

Basically the carriers are making a return before interest and tax of 57 cents on every dollar of sales, with some carriers generating almost 70 cents on every dollar. That is immense, unprecedented and pretty much unmatched in any industry, especially when you consider the scale and size of global container shipping around the globe.

Though Hapag-Lloyd has said that it expects its second quarter results to come in slightly lower than the last quarter, it remains to be seen if the 57.4% margin is the peak of profitability for the container shipping industry, or if they will continue to post extraordinarily strong results.

May saw the highest monthly increase in long-term contracted ocean freight rates, as the cost of locking in container shipments soared by 30.1% and means that long-term rates are now 150.6% up year-on-year.

With 2022 long-term contract rates more than doubling year-on-year, it is possible that those contract prices could offset spot rates, should they soften later in the year. Which means that 2022 financial carrier results could still potentially exceed 2021.

The ten carriers surveyed made a collective operating profit of USD 43.1 bn in Q1 2022, compared to USD 15.9 bn in the same period a year earlier.

By the end of 2022, the container shipping industry will have earned an unprecedented half a trillion dollars of operating profit, from two years of supply chain disruption and record freight rates.

The container shipping industry profits in the first quarter of 2022 beat Facebook, Amazon, Netflix and Google by 103%, expanding the gap from last year’s fourth quarter when liner industry profits beat the quartet by 14%.

Probably none of this is new news to you – but it is worth headlining and highlighting as it is a vital constituent in the price of goods and therefore a major contribution to the domestic and global inflation pressures and issues that are being experienced currently and for the foreseeable future. Someone has to ultimately pay for these higher costs and that is the consumer.

The container shipping lines are profiting from the perfect storm of demand and disruption, limiting effective capacity. Their pay-day comes after decades of meagre returns and one must hope that we will see a fair equilibrium, for shippers and carriers, eventually emerge.

Global supply chains are going to be under pressure for a while yet, and we will continue to share with you the most important developments so that you are informed and prepared to make critical decisions ahead of potential issues. 

We negotiate rate and volume agreements with carriers across all three alliances, which means we have the freedom to react to market conditions and changes. 

Please contact Elliot Carlile to discuss your supply chain expectations and deadlines to ensure your business is ‘future proofed’ for the rest of 2022.