Ocean carriers enjoyed their best quarter in container shipping history in the last three months of 2020, but are expected to have significantly surpassed that record in the first quarter of this year.
According to New York-based Blue Alpha Capital, the fourth quarter net profit for the 11 carriers reporting their financial statements, was $5.8 billion, however there are operators that reserve this information, such as MSC, achieved similar results, based on the average of 11 shipping lines, the consultancy estimated that the cumulative net profit for the period was a sum that amounted to $9 billion.
For the full year, Blue Alpha Capital calculated a combined net profit of $10.2 billion for the reporting operators and an estimated $15.8 billion net for all top-ranked lines.
To contextualize the 2020 results, they are more than double the total profit of about $7 billion earned by ocean carriers in the previous five years, in which several carriers accumulated year-over-year losses.
Moreover, the 2020 result represents a complete reversal of the industry’s pre-pandemic outlook.
“The bottom line for 2020 is a far cry from some of the catastrophic predictions that were made mid-year, with fears that the industry could post a collective net loss of up to $10 billion,” Alphaliner said.
Analyzing the results of the three major Taiwanese carriers, Evergreen, Yang Ming and Wan Hai, as an example of the turnaround, Alphaliner noted that the lines had “benefited from the transpacific rate hike and the additional impact of the box shortage.”
Evergreen posted a net profit of $853 million in 2020, while Yang Ming and Wan Hai posted profits of $420 million and $396 million, respectively.
Alphaliner also noted that the trio had reversed a break-even at Evergreen and losses at Yang Ming, while Wan Hai tripled its net income last year.
For his part, Blue Alpha Capital founder John McCown attributed the turnaround in the liner sector to an unforeseen overcorrection of capacity by carriers on many trade lanes at the start of the pandemic.
“Carriers took immediate and aggressive action to reduce capacity by eliminating sailings,” he said, adding that industry consolidation in the form of alliances had “made this logistically easier to accomplish.”
He added: “In the end, it was an over-correction on many lines that resulted in demand outstripping capacity.”
“The $64 million question remains whether the industry has embarked on a new trajectory for its results, based on new capacity management skills, or whether it will return to its historical average performance,” he added.
However, with huge spot rate hikes now complemented by much higher contract rates, carriers look set for even higher profits for the first two quarters of the year, at least if not for the whole of 2021.
In fact, China’s Cosco Shipping has reported that its first-quarter profits will exceed $2 billion.