Container shipping profits have peaked
The world’s largest shipping companies have reached the peak of its most profitable business in history. Now they’re starting to decide how to invest the billions of dollars they make each quarter.
Related article: Container shipping prices dropping everywhere except the US
Covid drove prices up as much as 20 times
Supply chain disruptions caused by pandemic-related disruptions to ports, factories and consumer spending have allowed shipping lines to charge customers 20 times more per container than they did pre-pandemic. The underlying costs haven’t changed much, so shipping companies can keep almost all of the price increases in profit.
Before the pandemic, shipping was a fierce, low-margin business, with shippers vying to keep prices down and customers on the table. Most companies oscillated between losses and marginal profits each quarter.
Analysts expect shipping rates to return to normal levels within about two years, with shipping lines returning to low margins and lean budgets. Before that happened, many shipping companies decided to use the gains from the pandemic to expand into new, more profitable lines of business, such as cruise ships and freighters.
The world’s largest shipping company is no longer content to be just a shipping company. Maersk is buying a portion of each step in the supply chain to make the most of my new cash and stay ahead of the competition. Maersk’s ambition is to manage all stages of supply chain logistics, from ships to planes to trucks to warehouses.
This year, the company has bought:
2 new Boeing 777 cargo jets to add to its budding cargo airlines’ existing fleet of 15 planes,
6 new electric trucks to add to its fleet of 215 vehicles,
8 carbon-neutral ships for $1.4 billion ,
2 warehouse and logistics companies that operate ecommerce fulfillment centers in the US,
Europe Senator International, a “freight forwarder” that acts as a broker between shipping companies like Maersk and their customers,
$5 billion worth of its own stock, in a massive share buyback program announced in May.
Mediterranean Shipping Company
The private, family-run business does not report quarterly profits—but it has been on a buying spree that could help it overtake Maersk to become the worlds’ largest shipping line.
In the past year, it has bought:
60 second-hand cargo ships
43 new ships on order
2 new cruise ships, at a price of $11.3 billion, which will make MSC the fastest-growing cruiseline over the next five years
In February, the world’s third largest shipping company launched an airline to carve out a piece of the air cargo business, which has also seen rates and profits soar during the pandemic. This year so far, it has bought:
Four new Airbus cargo jets, to expand its nascent fleet of six freight planes
10 ice-breaking container ships to expand its presence in the Baltic Sea
A $2.3bn container terminal at the Port of Los Angeles
Hapg-Lloyd has determined to apply its pandemic providence to shop for up port terminals, many of which were overwhelmed with congestion during the pandemic.
Company CEO Rolf Habben Jansen has stated the organisation is not interested by air shipment, freight forwarding, or warehousing like a number of its rivals—however it is continually open to shopping for any other terminal.
Since the pandemic began, it has bought:
A 30% stake with the deepwater port,
A 50% stake of the railroad terminal at Wilhelmshaven, in Germany,
A 10% stake in a field terminal on the port of Tanger-Med in Morocco
6 gargantuan 23,500-field ships for $852 million
10 smaller 13,000-field ships for $1 billion
The world`s 7th biggest delivery line, is seeking to upward push in the rankings. The organization has long gone on the most important ship-shopping for spree relative to its length of any delivery line; whilst its orders are filled, it’ll have more or less doubled the dimensions of its shipment fleet (and leap-frogged Hapag-Lloyd to grow to be the worlds’ 5th biggest delivery line).
This year, it has bought:
24 new ships for about $1 billion,
2 new big 24,000-field ships,
20 new 24,000-field ships for $2.6 billion
An experts believe there is still more growth and vertical integration/consolidation to come.
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Related article: Container shipping rates up to offset lower trade volume