The world’s largest container lines are on pace to smash last year’s record-setting profits by a stunning 73 percent, while empties now litter East and West Coast ports, consumers incur exorbitant rates pass-along rates that helped push July’s inflation rate to 8.5 percent.
Container corporations are reportedly on track to top $256 billion in net income, based on the 11 carriers monitored by Blue Alpha Capital founder John McCown. To put the income in context, it will likely exceed the gross domestic product of Portugal.
“These profit increases are being driven by continuing increases in the rates in contracts that cover the large majority of loads actually moving on ships,” McCown reportedly said.
Global container rates skyrocketed in 2021 from lows of $1,446 in the first half of 2020. By July 2020, container rates began to tick up, cracking the $2,000 mark in August, and going on a blistering pace that peaked at $10,361 in September 2021. Global averages fail to account for the grotesque overcharging of China to the U.S. container rates that shot above $20,000. Adding insult to the injury suffered by consumers who paid these pass-along expenses, outgoing empties litter U.S. ports, causing congestion and supply chain disruptions.
“In my view, the congestion emanates from the lack of accountability in moving the buildup of empty containers back into the terminals. Empty containers, and perhaps even export containers, are being rejected for return or delivery, because of the surging levels of imports that need to be handled. The industry needs to come together to plan how to better respond to the current challenges of returning empties to the (New York-New Jersey Port),” Federal Maritime Commissioner Carl W. Bentzel reportedly said. “Clearly, this has not happened, and the situation has gotten much worse. I understand that the problem is spreading to other east coast ports such as Baltimore, which reported to me last week that they too have an overflow of empty containers, hindering terminal operations and port fluidity.”
Ranchers and growers exporting products from West Coast ports complained their perishable goods were placed in jeopardy in 2021, as companies prioritized imports and fast-tracked empty containers back to China and other Asian nations. Although the Port of Long Beach and Port of Los Angeles are experiencing fewer ships idling off the coast, reconfigured trade routes have resulted in delays in Savannah and Gulf of Mexico ports.
As of June 2022, global container rates have dipped — to some degree — standing at $7,066. This consumer cost burden remains more than five times higher than it was during stretches of 2019 and 2020. The high cost of cargo ship and truck fuel is also adding to 40-year-high inflation, an issue that has become a flashpoint in West Coast dockworkers and longshoremen union contract negotiations. Inflation has largely outpaced wage increases and the men and women who handle container movement appear in line for a major pay increase.
“Foreign-owned, billion-dollar shipping companies that gouged American businesses by charging them 10 times the usual shipping rates and have contributed toward the rise in inflation,” union leaders reportedly stated.
Copenhagen-based A.P. Moller-Maersk A/S, one of the world’s largest, expects a record profit of $31 billion in 2022. Hapag-Lloyd AG, ranked fifth, reportedly rivals Volkswagen AG as Germany’s most profitable company.
Sources:
https://ajot.com/news/container-lines-are-set-to-smash-year-old-profit-record-by-73
https://www.statista.com/statistics/1250636/global-container-freight-index/
https://ajot.com/news/statementbycommissioner-bentzel-on-east-coast-empty-container-congestion
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