When it comes to rolling up COVID economy profits, it is hard to beat the bonanza reaped by container shipping lines over the past 18 months.
However, the multibillion-dollar question now for all the major players in that notoriously volatile and competitive sector is, where are they going to invest those profits as their pandemic profit party winds down?
To get some idea of how big a party it has been for marine container carriers, the marketplace should consider a few top-line numbers. For example, Drewry pegged the container shipping industry’s earnings before interest and taxes since 2020’s second quarter at over $US400 billion, which the U.K. shipping consultancy estimates is more profit than the sector has generated in the entire 50-plus years of containerized cargo shipping.
That is some kind of pandemic profit party.
So, what to do with all that cash flow in an industry that has more often been adrift in seas of red ink?
Locally, that fiscal buoyancy was likely one of the major motivations behind Poseidon Acquisition Corp.’s successful bid to acquire Seaspan and its Atlas corporate parent and take the companies private.
Seaspan, the world’s largest lessor of container ships, has been rapidly expanding its fleet to service what it believes will continue to be a robust container shipping market.
It is not alone in earmarking cash flow for fleet expansion.
According to Danish Ship Finance, more than 850 container ships have been ordered from shipyards since the beginning of 2021.
Prudent carrier companies are also using profits to pay down debt.
But the real big-ticket item looming on the near horizon for ship owners is carbon-neutral shipping. That transition is going to cost far more than $US400 billion. Try US$1.5 trillion.
So, while today’s ocean carrier profit party celebration might appear loud and excessive, the cost and retooling complications of tomorrow’s environmental and operational hangover will be staggering.