Record high ocean freight rates forces companies to explore new options

Wed 7 Jul 2021
Posted by: Noelle McElhatton
Trade News

Ocean carriers could be in line for profits of $100bn this year and look assured of continued medium term profitability as capacity remains an issue globally in a market described as “crazy”.

The Loadstar reports a substantial upgrade of Drewry’s quarterly Container Forecast report from an ebit (earnings before interest and tax) figure of $35bn to $80bn this year.

$100bn year

Senior manager of container research and author of the report Simon Heaney, said: “If freight rates surpass expectations in the remainder of the year, we would not be surprised to see an annual profit line in the region of $100bn.”

Incidents such as the Ever Given Suez grounding and Yantian port restriction have helped fuel a market where triple digit annual growth figures for spot rates are no longer surprising, Heaney said.

Although Drewry expects ebit to drop by a third next year, it still predicts industry profits of almost $70bn.

Smaller casualties

However, spiralling freight rates are not benefiting all, the Loadstar also reports. Lars Jensen, consultant at Vespucci Maritime said the margins of smaller shippers were being hit harder.

He said the risks were from rising freight rates and the “widening spread in the market has become a critical competitive parameter for importers” which could result in significant shifts of market share.

Container alternatives

According to Lloyds Loading List, a 37% increase in rates since the beginning of the year has forced some freight forwarders to switch from containers to bulk vessels to find a more affordable and available option.

ISS Global Forwarding India has chartered 12 bulk vessels and converted them for use on routes from China, Taiwan, and Thailand to India and Red Sea countries. It claims this approach saves almost 25-30% in supply chain costs and improves reliability.

Frozen assets

Other shippers have seen an increase in the use of reefer (refrigerated) vessels for moving cargo rather than in containers. With the surge in demand the reefer fleet has gone from 60-70% utilisation to almost fully utilised, they said.

Shipping and logistics company MSC has said it expects the international reefer market to grow by 3.7% annually, reports the Produce News.