Shipping shifts from jackpot to job cuts after $364 billion boom
That’s because the container shipping industry, cast as the Grinch that spoiled Christmas over the past two years with record-high freight rates and slow deliveries, is returning to its pre-pandemic place in the corporate world: perennial underachiever Charlie Brown.
The biggest carriers posted net income totaling $364 billion in 2021 and 2022, according to figures compiled by industry veteran John McCown, after a decade of scant profits. They’ll likely drift back into the red this quarter as the rates they charge fall below costs and look to stay there for the foreseeable future.
Booms-turned-busts have been more abrupt and sensational, but rarely has an established industry so tied to the global economy lurched from historic profits to below break-even levels more directly than the shipping lines that move 80% of the world’s merchandise trade have this year.
After Covid’s massive demand shock, the culprit now is too much supply.
“I’m certainly concerned about the next 24 to 36 months,” Rolf Habben Jansen, chief executive officer of Hamburg-based Hapag-Lloyd AG, said in an interview last week.
“We are going to see a downturn.”
Consider the tougher times facing A.P. Moller-Maersk A/S, the largest publicly traded container line.
According to Bloomberg Intelligence credit analyst Stephane Kovatchev, the Copenhagen-based company’s free cash flow, which reached $27 billion last year, may drop about 80% this year and could turn negative in 2024. That may weigh on the company’s bonds, he wrote in a research note on Friday.
Over the past 10 days, Maersk, Hapag-Lloyd and closely held CMA CGM SA of France — all top-five players that together control about one-third of the world’s container capacity — said they’re cutting
