Shipping lines raked in a ‘mind-blowing’ $59.3 billion profit in the first quarter of the year – the highest quarterly profit in container shipping history – as the industry continued to benefit from prices higher, said the founder of Blue Alpha Capital. John McCown said in its latest McCown Container Results Observer report.
The first quarter of 2022 actually marked the sixth consecutive quarter of the highest net profit ever for the industry, according to McCown’s report. The industry’s net income of $59.3 also marked a 300% improvement from the first quarter of 2021, equivalent to $40.2 billion. Compared to the fourth quarter of 2021, total profits increased by just over 13%.
“These actual results are diametrically opposed to what anyone might have envisioned at the start of the pandemic just over two years ago,” McCown writes.
Among the 11 largest shipping companies, CMA CGM leads the pack in terms of profits with a net profit of $7.5 billion, at least according to McCown’s estimate, as the private company has not yet published its first quarter results. Maersk came in second, generating net profit of $6.7 billion, which McCown also estimated as the company reports in terms of EBITDA.
McCown says the blockbuster results, despite an overall 1.1% overall decline in volumes from the first quarter of 2021, are likely to cause a “fundamental shift” in future carrier behavior.
“The vast majority of containers move under contracts that are renewed throughout the year and last for a year or more. This simple fact means that improved results have a long tail even if supply and demand conditions change significantly,” writes McCown.
The report also highlights that the industry’s strong financial performance has translated into “unprecedented” new vessel orders, with the industry’s total order book now approaching a record high of almost 30% in terms of TEU capacity. In addition, higher profits also make it likely that the ILWU will increase its economic demands in its negotiations with US West Coast port employers, which are currently underway.
Due to the uncertainty in the industry, McCown maintained its original profit forecast of $220.5 billion for the container shipping industry in 2022, noting, “Right now, I’m not as confident of further improvement from this later point.” But he adds: “A key tool to watch that the industry is appreciating again is the removal of crossings. Expect this to be a key driver of industry performance in 2022 and beyond. »
As an interesting note, according to McCown, the container shipping industry’s profits in the first quarter of 2022 beat those of FANG – an acronym for Facebook, Amazon, Netflix and Google – by 103%, widening the gap from the fourth quarter of last year when ocean liner industry profits beat FANG by 14%.