Just a short-term trend?
Rising freight rates, little free charter capacity, low bunker prices – developments are positive for major container shipping lines, despite the pandemic. It remains to be seen whether the trend will continue. An analysis was provided recently by Falk von Seck, professor for sustainable logistics and transport management at the Jade University of Applied Sciences in Elsfleth (Germany). Claudia Behrend reports.
The economic situation is currently anything but simple, on account of the intensification of the pandemic in many countries worldwide. Thus, in a year-on-year comparison, the volume index for goods exports compiled by the United Nations Conference on Trade and Development (Unctad) declined by no less than 16.2% in the second quarter of 2020.
But what does this mean for the maritime shipping industry? Unctad’s recently published ‘Review of Maritime Transport 2020’ has predicted that the volume of goods traded internationally by sea will fall by 4.1% this year. Even though this prediction is negative, the decline is at least much smaller than had initially been expected. The report’s authors have projected a return to growth in 2021, and underlined the industry’s economic resilience and its ability to react successfully to the impact of government measures to contain the outbreak of Covid-19.
Cancelled sailings for one
For shippers and freight forwarders the knock-on effects of measures to contain the pandemic manifested themselves above all through cancelled sailings in weeks 24–35 of this year. The two major shipping line alliances – namely The Alliance (Hapag-Lloyd, Yang Ming, Ocean Network Express, Hyundai Merchant Marine) and 2M (made up of Maersk and MSC, the world’s two largest shipping lines) – were at the forefront of this development.
According to the Copenhagen-based Danish maritime market research company SeaIntelligence Consulting, The Alliance cancelled 21% of its calls between Asia and Northern Europe, with the figure for 2M coming to 20%. The Ocean Alliance in turn, in which CMA CGM, Evergreen and Cosco have teamed up, only reduced its sailings by 1% in the same period.
In a recent webinar, entitled ‘Old and New Logistics’ and put on by the ‘Maritime Cluster for Northern Germany’, Falk von Seck, professor for sustainable logistics and transport management at the Jade University of Applied Sciences in Elsfleth (Germany), said that “this development is reflected in the available tonnage, as well as in the charter rates. Since the outbreak of the pandemic, an 8,500 teu vessel has earned as much as was last the case in mid-2019. For panamax ships,” von Seck pointed out, “the rates have even reached the level of nine years ago.”
Margins hitting a high
These developments have also had an impact on the freight rates. Von Seck informed his audience that “freight rates for a 40 ft container being shipped between Asia and the Americas have more than doubled from USD 1,500 in January to USD 3,500–3600.”
The trend is not quite as strong as this between Asia and Europe, but it has an impact on lines’ ebitdas. “Maersk’s margins have risen by 18.9% since 2018.” The world’s largest shipping line is no exception. Other box shipping lines have been able to significantly improve their margins in the second quarter of 2020. Evergreen, for example, managed 12%; closely followed by Hapag-Lloyd with 11.7%. Wan Hai achieved 10.3%, CMA CGM 9.3% and ZIM 9.1% margins.
Thus it hardly comes as a surprise that there is a whole string of positive news from the shipping industry. The Taiwanese shipping line Yang Ming Marine Transport was in the black for the first nine months of the year. The news from Hamburg was equally positive, with Hapag-Lloyd also happy to report a leap in profits from January to September. The Japanese container shipping line Ocean Network Express (ONE), in turn, has also been able to massively increase its profits. In the third year of 2020 HMM reported its highest operating profit for the past ten years. The news from the world’s largest box shipping line, Denmark’s Maersk, is no different. Its volumes as well as total sales declined, but its ebitda rose in every segment and improved by 39% overall.
It isn’t in any way certain that this trend will continue for shipping lines, however. “Fuel prices won’t stay as advantageously low as now,” von Seck underlined. “That’s why it’s absolutely essential to make the entire transport chain more resilient – otherwise the shipping industry will also experience a dampener.”
