The major shipping lines overall have reported their best third-quarter revenues since 2010, as a combination of factors such as capacity discipline, container shortages, high freight rates and lower operating costs created an environment perfect for them to be profitable. The aggregate profits of 11 companies analyzed amounted to US $ 4.530 million in the first nine months of 2020, compared to only US $ 488 million in the same period of 2019, according to a report Drewry.

Maersk, for example, reported its best quarter since transforming from a conglomerate of companies in 2016 to a global integrator of container logistics, with its net revenue increasing 82% year-on-year.

The evidence to project a strong 4Q20 is the monthly revenue growth of the three Taiwanese shipping lines, as they posted their best year-on-year revenue growth in October. While Wan Hai posted revenue growth of 32% year-on-year, Evergreen and Yang Ming posted growth of 27% and 24% year-on-year, respectively.

Furthermore, according to Maersk CEO Søren Skou, the container market is improving even more and they expect to deliver an even stronger 4Q20 than their 3Q20 performance. The Maersk Group now expects full-year 2020 EBITDA before restructuring and integration costs to range from $ 8.000-8.500 billion (previously $ 7.500- $ 8.000 billion as announced on October 13).

Profit outlook for 2021

Despite the news surrounding the second wave of the pandemic, Drewry continues to be positive in terms of earnings for shipping lines in 2021. Now, whether airlines can match this year's performance or even exceed expectations depends on many factors, but the consultancy estimates that the industry should be able to earn about $ 6.000 billion in operating profit.

Some of the early offers show that shipping lines are quoting Transpacifico's contract rates for 2021 at around 60% higher than current contract rates. This is not surprising given the very high levels of spot rates, which means that they will also enjoy high freight rates next year. Also, with oil prices still around $ 40.000 billion, this should support the cost side in the form of lower fuel prices.

Building orders

Despite some occasional incursions of new orders by some shipping companies such as OOCL (new build) and MSC (second hand), the overall Capex trend has been down in 2020.

That said, the current order-to-fleet ratio is the lowest this century, and there are very few confirmed for delivery after 2021, indicating the need for additional new orders. A few extra ULCVs are unlikely to have a negative impact on the market, but overall Drewry He estimates that the focus will be on smaller units that offer deployment flexibility. The renewed interest in new construction is not surprising given the current uptrend in the container market, and any order frenzy would indicate that the market has not broken from its previous cyclical pattern.

For Drewry, investing in expensive assets such as ships will always be a gamble because shipowners do not know in advance the conditions under which those assets will operate. Over the 20+ year life cycle, it is expected that there will be more good years than bad, but each new influx has the potential to destabilize the market, in one way or another.

Container shortage Until when?

According to shipping lines, the shortage of containers has increasingly become their main concern: the lack of empty equipment available at export locations can further disrupt scheduling and navigation. In the consulting firm's opinion, the problem is not so much the real shortage of containers as the lack of availability caused by traffic jams. Container production is accelerating, but until operational problems are solved this problem is likely to continue as long as demand is high.