Container shipping industry starts to come down from pandemic highs

One of the biggest players in the container shipping industry, Maersk, recently lifted its annual profit forecasts for the third time this year.

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It raised its full-year forecast for underlying operating profits from US$24 billion to about US$31 billion.

Independent maritime research consultancy Drewry estimates that the entire industry will make an operating profit of US$270 billion this year, more than 10 times the profit of US$26 billion in 2020.

Boosted by soaring demand for masks and other personal protective equipment, along with consumer spending during the COVID-19 pandemic, the industry has enjoyed a boom over the past two years.

But the effect of the pandemic appears to be wearing off and the industry is expected to be coming down from its highs.

Even the typically busy August to October period – when businesses move goods for the year-end retail season – appears to have weakened.

MODERATE PEAK SEASON

The industry is expecting a more moderate peak season depending in part on how China’s zero-COVID policy plays out and how the energy crisis evolves, said DHL’s chief executive John Pearson.

Mr Raymon Krishnan, president of Singapore’s Logistics and Supply Chain Management Society, noted that Trans-Pacific eastbound rates have slipped below US$5,000 per container. Last year, a container cost about US$15,000 to US$20,000.

“There’re even signs that it is going to, very soon, or possibly, even reach the US$2,000 per TEU mark, which is what we used to see pre-COVID,” he told CNA.

SHIPPING COSTS AND INFLATION

Globally, shipping costs are a key driver of inflation. When freight rates rise, prices for goods do too, although the pass-through to inflation from such rates is less than those associated with food or fuel costs.

Mr George Griffiths, managing editor of Global Container Freight at S&P Global Commodity Insights, noted that the world is seeing a general increase in the cost of living.

He added that wages are not rising at the same pace as costs of food, housing and energy.