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Global container carriers thrive despite signs of rate decline

The latest Xeneta Shipping Index (XSI) Public Indices Report has shown the decline of 3.6% in long-term contracted ocean freight rates in January fails to tarnish an exceptional year for carriers.

Particularly, the intelligence platform's analysis that was based on crowd-sourced data from global shippers has indicated the second consecutive monthly dip in rates, following a staggering 14 months of consistent increases.

However, despite the decline, contracted rates stand 98.1% up year-on-year, demonstrating the commanding position carriers continue to occupy in shipping negotiations, according to Xeneta.

"The logistics chain remains stressed with demand outstripping supply, port congestion, a lack of equipment and the ongoing pandemic impacting across key global trades," commented Patrik Berglund, CEO of Oslo-based Xeneta.

"This puts the carriers in a position where they can dictate terms to smaller shippers through elevated rates and limited availability while locking in 'bigger fish' at favourable prices," explained Berglund.

As a result, large numbers of customers are pushed over to spot rates and, with no alternatives, are forced to "put their hands deep into pockets that have grown increasingly bare," he continued.

On the carrier side, things could hardly be better, according to Berglund, who noted that "Maersk, in particular, has achieved what appears to be astounding results over 2021, and they’re far from alone."

The Value of Intelligence 

According to the Danish giant Maersk, expectations for full-year earnings before interest and taxes (EBIT) now stand at US$19 billion, meaning earnings for 2021 could be greater than the previous five years combined.

In addition, COSCO-owned Orient Overseas Container Line (OOCL) saw its revenues double in the fourth quarter, to US$4.8 billion, driven by an increase in average revenue per TEU of 142.3% year-on-year, while for the full year, revenue was up by 110% to US15.7 billion, despite volumes rising by just 1.7%.

Similarly, Ocean Network Express (ONE) saw its FY21 third-quarter profit skyrocketing by 418% and expects more than US$15 billion in full-year earnings, while Hapag-Lloyd has announced its EBITDA and EBIT are anticipated to exceed US$12 billion and US$11 billion respectively.

"It’s far too early in the day to forecast whether these rates, and the stellar results, will continue, but small dips aside, it’s difficult to see where a major correction would come from at the moment," said Berglund.

Global Insights 

From a regional perspective, Xeneta’s XSI paints a picture of mostly modest movements on key import and export indices, with some notable exceptions.

In Europe, the import benchmark fell by 7.6%, reversing the increases recorded in December and November. However, this failed to dent the overall strength of the market, with the index remaining 89% up year-on-year.

Meanwhile, exports moved in the opposite direction, rising by 3.6% to push the benchmark up 75.9% year-on-year.

In the Far East, imports rose marginally by 0.8%, moving 79.6% higher than the equivalent period last year, while exports slipped by 3%. Despite the fall, the index stands a formidable 122.9% up year-on-year, according to Xeneta's data.

The US saw both import and export figures moving northwards, with the former rising strongly, by 7%, which is up 106.1% since January 2021, while the latter recorded a 5.5% growth. Exports now stand 48.5% up year-on-year.

Change On The Horizon? 

In conclusion, Berglund believes that the year ahead will be interesting, with planned fleet expansions, pandemic developments, geopolitical issues, and, amongst other factors, differing approaches from key players.

The different approaches of the top global ocean carriers have already been noticeable with MSC deciding to take over Bolloré Logistics’ African ports division, aiming to offer more end-to-end services, while CMA CGM has recently acquired Colis Privé Group, a home and relay parcel delivery company, believing that this action will strengthen the presence of its logistics subsidiary, CEVA Logistics, in e-commerce services, especially last-mile deliveries, as well as in parcel deliveries to consumers.

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