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The container market bonanza continues unabated. OOCL is the latest to declare record 2021 profits, in its case $7.1bn in 2021 compared to $903m in 2020. 70% of profits will be paid as dividends to shareholders. The top liner companies made more than $100bn in profit in 2021 assuming that MSC’s performance tracks that of Maersk and CMA CGM. Evergreen is the latest liner company to act in the time honoured way by ordering more newbuildings, in this case three 24,000 teu monsters at Hudong Zhongua in China, at around $170m each. The ships will burn fuel oil and will have scrubbers fitted. Evergreen has 12 similar designs on order at Samsung Heavy Industries in South Korea. Fellow Taiwanese owner Wan Hai has ordered five neo-panamax ships at Samsung Heavy. The 13,000 teu ships are thought to be costing around $140m each and add to 10 other newbuildings Wan Hai has on order. Non-operating owners are taking advantage of high newbuilding prices and blocked shipyards to negotiate eye watering time charter rates for tonnage that can be deployed this year. Seaspan reported in March that it has fixed 18 of its ships – mostly panamaxes - for one to two years at a total of $200m in “incremental cash flow” which may suggest “over and above current cashflow”. Seaspan’s parent, Atlas Corp, posted net profits of $142.3m for 2021, compared to a net loss of $26.1m in 2020. Liner companies remain confident about 2022 as the main drivers of last year's boom market largely remain in place. The vast new orderbook of around 600 ships has not yet begun to deliver. Congestion remains a problem as public health measures block ports around the world and as port operators have been slow to catch up with the 1m teu per month step-change up in demand for container shipping experienced during the pandemic. Demand is holding up well so far this year in spite of Lunar New Year, lockdowns in China, the rising cost of living in the major consuming nations and the war in Ukraine. Bottlenecking remains a problem, with global waiting days estimated at 18m teu-days by Kuehne+Nagel. The lockdowns in China have resulted in several terminals running below capacity, forcing exporters to hold back cargoes and wait longer to get them onto ships. Shanghai has just joined a raft of other cities in lockdown. But China is now operating so-called closed loop systems in which some activity is allowed. For instance in Shenzhen, this prevented chip maker Foxconn from shutting down during that city’s lockdown as workers agreed to live on-site for the duration of the lockdown. Chinese health authorities fear the alternative to lockdowns, as the case load in a population of 1.4bn would swamp healthcare resources In North America, bottlenecking has not gone away, it has simply moved from the west coast to the east coast. Fewer than 20 containerships were said to be awaiting a berth at Los Angeles as of March 20. However, at Charleston, rising numbers of vessels were waiting in March, as liner companies adjusted to all-water Asia-USEC services to avoid west coast bottlenecks. Fortunately the Ever Forward got stuck in Chesapeake Bay because it was not in the main large container ship channel, meaning ships can pass to access the port. The war in Ukraine is not disrupting the liner shipping markets very much as sailing schedules can be rearranged. But liners are increasingly avoiding calling at Russian ports – for instance, Ocean Network Express said on March 18 it would stop accepting reservations for new container shipments to Vladivostok in Russia’s Far East, following a similar move to stop calling at St Petersburg at the end of February. As western manufacturers and retailers exit Russia under sanctions, containerised shipping demand in and out of its ports is down an estimated 50%. Rail volumes from China into Russia are up instead as Chinese exporters enter the market vacuum created by western companies’ departure. Freight rates remain elevated with the Baltic Freightos Global Container Freight Index standing at $9,430 on March 25, off the peak of $11,109 set on September 10 last year, and down slightly on the $9,789 posted on February 25, but remarkably flat given the usual interruption of Lunar New Year. The China-USWC index peaked at $16,353 on March 11 and has since slid just 3% with lower congestion to $15,889. The China-USEC index has fared less well, coming off 6% from a peak of $18,432 on March 11 to 17,386 on March 25. The Asia-Europe trades have fallen more, with China-North Europe down from a peak of $14,999 on January 28 to $14,255 on February 25 and $12,314 on March 25, a fall of 14% month on month. Inflation in Europe is probably less to blame than reduced demand at Chinese load ports due to lockdowns, so the fall may be temporary. Tranatlantic rates are buking the mild downturn. The westbound trade has jumped 11% in the 30 days to March 25 from $6,870 to 7,623. Over the same period the backhaul ECNA to Europe is up 12% from $563 to $631. The first quarter of 2022 has then been quite satisfactory for the liner companies. Their attention may turn to costs in the rest of the year as fuel prices rise and as they have to renegotiate time chartered tonnage at rather higher rates than they enjoyed last year. They will have to work hard to avoid a squeeze on profits. If they attempt to raise prices, they will incur further interference from regulators such as the US Federal Maritime Commission and even Congress, with its misguided bill trying to force liners to load US agriproduce into containers to ship to Asia, where the grain terminals are built to receive bulk carriers and not unload boxes. Sometimes, even well-meaning politicians don’t have to go to war to cause unintended consequences.

Everyone’s a winner in container shipping

Conditions remain firmly in liners’ favour for this year.

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