According to Moody’s Investor Service, container shipping rates will remain at record levels for the rest of this year and into 2022. Global demand is significantly outpacing capacity in an environment that will further increase carrier profits.
“We expect financial performance to be even better in 2021 than it was in 2020,” the ratings agency stated. “Consumer and industrial demand for goods remains very strong while a limited supply of new vessels is entering the market.”
Moody’s expects the strong financial and operational performance to extend to the dry bulk and tanker sectors. This has led to its decision to upgrade the shipping segment rating from stable to positive. The agency indicated that its base case scenario may even be too conservative with demand in all three sectors increasing and capacity remaining tight.
Moody’s expects volume growth of between 5 and 7 percent against capacity growth of 4 percent. Clarksons Research Services is predicting volume growth of 5.7 percent with capacity growth of 4 percent. IHS Markit, parent company of JOC.com, is forecasting 7.5 percent growth in container volume and 3.2 percent growth in capacity.
The supply-demand imbalance has been in the carriers’ favor for months. Operating profits of the 11 reporting carriers, measured in earnings before interest and taxes (EBIT), reached $16.2 billion in the first quarter, greater than the sum of the previous 10 first quarters combined, reported Sea-Intelligence Maritime Analysis.
Drewry estimated that operating profits for all container shipping lines in 2020 totaled $26.6 billion, up from about $5 billion in 2019. The consultancy recently estimated that the industry operating profits will surge to $35 billion in 2021, but this estimate is expected to be boosted due to continuing high demand and persistent rate increases on the major east-west trades.
According to benchmarking platform Xenata, spot rates on North Europe-US East Coast recently hit over $3,000 per TEU, over 200 percent above pre-pandemic 2019. On China-North Europe, spot rates were as high as $5,726 – up a huge 636 percent.
(photo CMA CGM)