Customers see transportation companies bringing in enormous sums but moving fewer or similar numbers of containers compared to last year. ”There may be some dark skies on the horizon for the carriers,” states experienced shipper.
Container volumes decline or stay at the same level as last year, while earnings soar vigorously.
Such is the basic conclusion from this week’s financial reports and upward adjustments for some of the world’s largest transportation companies at sea.
This week, Maersk and Hapag-Lloyd dialed up expectations, thus setting the stage for new gigantic profits in 2022, but this occurs on a market in which Maersk saw diving volumes, while Hapag-Lloyd reports a flat volume growth.
If this tendency continues for another month, some shippers would want a serious talk with their carrier
Bjørn Vang Jensen, former head of logistics at Electrolux and current consultant at Sea-Intelligence
Furthermore, logistics firms Kuehne + Nagel and DSV have increased sea earnings as well despite falling volumes in the first months of the year – in DSV’s case, a decline of 7 percent when corrected for the growth added due to the acquisition of logistics firm GIL.
The week’s events are likely to result in new headaches among customers. For roughly a year and a half, they have seen the bill head up, up and up.
”Now, we have reached a level – you may call it a tipping point – in which contract rates are above spot rates and even to a significant degree. That cannot go on,” says Bjørn Vang Jensen, former head of logistics at Electrolux and current consultant at Sea-Intelligence, to WPO.
”I imagine that if this tendency continues for another month, some shippers would want a serious talk with their carrier. These will be put under heavy pressure to adjust rates and terms.”
High uncertainty
Helping to complicate the image is that the Chinese New Year traditionally carries with it a volume decline in January and February, said container analyst Lars Jensen earlier this week to WPO.
”The freight rates are primarily determined by the lack of capacity at the moment, not by the freight volumes,” said Jensen, while he deemed it ”extremely difficult to predict with any degree of certainty how the freight volumes will develop throughout the year.”
Companies on sea freight
A similar message appeared in ONE’s financial report, in which the year’s first months are the Japanese carrier’s fourth quarter. In the report, ONE was very cautious in its assessment of the market in 2022, in which Covid-19, in particular, is a continued source of great uncertainty in relation to supply chain bottlenecks.
According to ONE, global demand for transportation of commodities remained strong in January and February 2022. On routes between Asia and North America, volumes grew by around 9 percent in this period compared to the year before.
Earlier in April, figures from Cosco carrier OOCL showed increasing revenue but also diving volumes in Q1. The decline of 9,2 percent to 1.79 million teu was due to the big problems and disruptions in the logistics chains.
More long-term contracts
Sea-Intelligence’s Jensen has laid eyes on several of the container carriers’ long-term contracts.
According to Jensen, the carriers attempt to ”put the shippers in chains for a very long time at a fixed rate and variable bunker” in some of the contracts, while customers in other cases will be able to leave the contracts quite easily if they want to.
He stresses that from his perspective, these contracts are in no way the ideal solution, pointing out that the market is not necessarily driven by rational decision-making at the moment.
The freight rates are primarily determined by the lack of capacity at the moment, not by the freight volumes
LARS JENSEN, CEO, VESPUCCI MARITIME, previously this week
”It is certainly not all deals – including long-term deals – that are difficult to leave. Some of the rate levels in the contracts are extremely high, since shippers have been forced to prioritize space on the container ship over the freight rate,” says Jensen, adding:
”Now, there are several carriers saying they have seen flat or declining volumes. There may be some dark skies on the horizon for the carriers.”
When Maersk in February presented a record result with an operating profit of USD 24bn, the carrier confirmed that growth in the long contracts would continue in 2022. In 2021, 65 percent of the customers were on long contracts.
”We expect it to reach 70 percent this year, and prices have climbed as well, so our contract portfolio will, with the prices we signed them at, in any event provide us with added income of USD 6bn compared to last year,” stated Maersk CEO Søren Skou at a press meeting.
Most have one-year contracts, however, out of the 7 million contracts, 1.5 million contracts are multiannual, Skou said.
