The shipping industry is entering a period of decline where capacity management will be key to deciding how much of the recent revenue and profit gains the carriers hold on to, shipping analysts Drewry said in its latest Container Forecaster report.
Allied to the onset of the global COVID-19 pandemic, the upsurge in demand and chronic supply chain congestion guaranteed windfall profits for shipping companies.
Beginning in the second quarter of 2020, industry-wide earnings before interest and taxes (EBIT) ran at over $400 billion (€403 billion) until the end of the same period this year.
Over the past two years, a profit bonanza pretty much fell into the laps of shipping companies, Drewry said.
"However, now that the market is in a tailspin with high-inflation sapping consumers’ spending power and spot rates in a seven-month funk, liner bosses are going to have to work much harder to keep the profits flowing," analysts wrote.
This could spell better news for seafood companies, which have suffered from two years of high rates following the onset of the global COVID-19 pandemic -- although rates have fallen sharply over recent months.
Supply and demand dynamics are now driving normalization for container shipping, rating agency Moody's said noting that shipping earnings are past their peak.
A slump in container rates is unavoidable, HSBC Global Research said, in a gloomy read of the market last month.
Shipping lines’ earnings will plunge by 80 percent in 2023 and 2024 as a down-cycle hits following two years of unprecedented rises in freight and charter rates.
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