9 Major Shipping Companies Earned $15.1 billion on Revenues of $128 billion! Even More in the First Quarter of 2021!
2020 was a year of rebirth for the shipping industry, especially for the liner shipping industry. The last three months of 2020 were the best-performing quarter in the history of container shipping.
Global freight demand is soaring, and the "time lag" between China and overseas countries during the peak of outbreaks gives the shipping market a great respite period. The tightened policy and the relatively loose market boost the economy jointly. In addition, the shipping industry plays an irreplaceable role in transporting daily necessities. The demand remains, while ship is getting less. Since then, freight rates have soared, which has brought a sharp increase in profit to shipping companies. The freight rates of routhes in the United States, Europe, the Mediterranean Sea and the offshore have surged in an all-round way.
In the first quarter of this year, the container freight rate maintained a high level. Considering that the new annual freight contract price doubled year-on-year, the new annual contract price will be implemented in the second quarter. Shipping companies are expected to make greater profits in the first two quarters of this year!
A few days ago, COSCO Shipping Holdings Co,Ltd. disclosed its performance forecast for the first quarter of this year, during which the company is expected to make a profit of 15.45 billion yuan, an year-on-year increase of nearly 52 times from about 292 million yuan. It was predicted that the container shipping market will keep growing, and the overall performance will increase significantly compared with the same period of last year.
In 2020, the profits of the nine major shipping companies have tripled
As shipping companies announce their 2020 results one after another, the world's nine largest container shipping companies, including the largest shipping company, Maersk, have tripled their total earnings in 2020 from $4.8 billion to $15.1 billion, according to a report written by Alphaliner, a well-known shipping analysis organization. In 2020, the revenue of these nine shipping companies, including Maersk and Hapag-Lloyd, increased 6.5 percent to $128 billion.
Aplhaliner wrote that the data covers 11 largest container shipping companies in the world, but privately held MSC and ONE are not included. Most importantly, the result shows the impact of the Covid-19 pandemic where a lack of capacity led to a surge in freight rates due to the rapid growth in cargo volumes. The report also revealed that the lower fuel cost also benefits the operating income. Data in the report has been corrected for abnormal losses and gains arising from any vessel sales and impairments.
Shipping companies will earn more in the first quarter of this year
Blue Alpha Capital, a New York-based consulting firm, said the 11 shipping companies that reported financial results earned net profits of $5.8 billion in the fourth quarter of last year. Assuming that earnings of non-reporting carriers (such as MSC) based on the average level were similar, Blue Alpha Capital estimated that the accumulated net profit of the 11 shipping companies in this period reached a staggering US$ 9 billion.
By comparison, the 2020 profits were more than double the total profits of the past five years (about $7 billion), according to Blue Alpha Capital's, with several of the shipping companies posting year-over-year losses during that period.
In addition, the 2020 results completely overturned estimates of the industry's outlook prior to the epidemic. Based on their analysis of the results of three major shipping companies in Taiwan Province, EVERGREEN MARINE CORPORATION (TAIWAN) LTD. (EMC) , Yang Ming Marine Transport Corporation (Yang Ming) and Wan Hai Lines, Alphaliner noted that they benefited from soaring trans-Pacific freight rates and surcharges due to container shortages. In 2020, EMC made a net profit of $853 million, while Yang Ming and Wan Hai recorded profits of $420 million and $396 million respectively.
Alphaliner noted that EMC turned around its break-even, that Yang Ming reversed its loss, and that Wan Hai tripled its net profit.
Another institution pointed out that in the short term, if the overseas epidemic is controlled and the supply chain gradually returns to normal, high freight rates may fall back. In the medium and long term, if the new ship orders can be kept at a rational level, the capacity growth will slow down. While the market concentration will contribute to improvement in market structure. Thus the freight rate will be pushed up gradually in the medium- and long-term. Nevertheless, with the sharp increase in spot freight rates and contract prices, shipping companies are expected to make greater profits in the first two quarters of this year, at least throughout 2021.