During the peak of freight rates in 2021-2022, there was frequent criticism that the carriers’ high level of profitability was a major cause of inflation. Freight rates were a little over 200% higher at the peak than in the same period in 2019. The shipping lines’ profits in 2021 and 2022 were more than US$400 billion.
However, when these profits are compared to the value of cargo carried, carriers’ profits are incredibly modest. Even when merchandise categories that are typically delivered in containers are considered, they are largely inconsequential.
According to the IMF, the global average inflation rate in consumer prices in 2021 was 4.7%, rising by 4% points to 8.7% in 2022.
“When we compare global inflation to the carriers’ profits as a share of the value of global merchandise trade, we can calculate the inflationary effect caused by the carriers’ profits. In simpler terms, the increase in carriers’ profits from one year to the next can be seen as the resultant added inflation in that year,” stated Alan Murphy, CEO of maritime data analysis firm Sea-Intelligence.
“As we can see from Figure 1, in the context of full inflation each year, carriers’ added profits account for only a minor explanatory variable,” noted Murphy.
He went on to explain, “Seen over the full period covering 2020-2022, global inflation has been a cumulative 17.5%. In the same period, the cumulative effect of the carriers’ increased profits was 0.9%. For added context, it should be noted that the sharp drop in carrier profits in 2023, will add a deflationary component to world inflation.”
