Analysts at Copenhagen-based Sea-Intelligence have re-evaluated their liner profitability projections for 2020 on the back of the many positive interim results posted recently. If the global carriers can hold their nerve, they’re now collectively on course for one of their best years.
“As the carriers continue to exhibit strong capacity and pricing discipline, they are on a path to a potential profit of as much as USD 12-15 Billion in 2020, but the risk of a price erosion is now heightened,” Sea-Intelligence noted in its most recent weekly report.
Based on the interim results posted so far, carriers have increased their profits in the first half 2020 by a stunning 160%.
Sea-Intelligence has crunched the numbers to make its full year projections based on the assumption of an annual volume decline of 3%.
If the carriers are able to maintain the rate increase seen in the first eight months of the year, they would end up with a profit of $12.9bn, a remarkable turnaround from earlier warnings from many analysts as Covid-19 lockdowns gripped the world sparking suggestions of multi-billion dollar losses for the container shipping industry.
If the improvements seen by the major carriers in their published interim results are indicative for the carriers that have not yet published Q2 results, and if they are able to maintain the same improvement momentum, Sea-Intelligence then projects the industry is looking at a profit level of $15.4bn.
If the rate declines in the final quarter down to the same level as in Q4 of 2019, the carriers are facing a profit in 2020 of $10.7bn.
If the carriers engage in a price war in the final quarter leading to a rate collapse, the full year results as predicted by Sea-Intelligence would still be $3.8bn in the black.
The analysts also added two more scenarios to factor in the effect of a sudden pandemic-induced drop in volumes in the final quarter. Even with a 5% drop in boxes moved between October and December liners will post healthy profits.
Concluding, the report noted there is still considerable uncertainty surrounding the 2020 results.
“There is a very high likelihood that the carriers will emerge from 2020 with financial results that are better than they saw in 2019, despite the pandemic,” the report suggested going on to warn that some rate erosion was likely to manifest in the coming months.
The extraordinary turnaround in fortunes of the world’s top carriers brought about by clever use of blanked sailings has seen rates on the transpacific to the US West Coast hit records levels this summer, something that has led authorities in the US and China to keep closer tabs on carrier activity.
”Crunched the numbers?”
Does anybody pay attention to these consultants any longer (let alone pay them any fees)?
Only four months ago they were telling everybody that there would be bankruptcies and $ 7 -10 billion worth of losses.
Now they are saying 2020 will be the best ever year for liner shipping. Which ever direction the wind blows, the consultants follow – that’s not a prediction, it’s an extrapolation…..and we can all produce those multiplication sums.
By the way, this article (and the consultants) don’t seem to mention the part played by lower overall bunkering costs in the sudden turn-around. After all the VLSFO panic, the fuel costs have been a major component in the changing fortunes of liner operators.