Container shipping rates will remain at record levels for the rest of the year and into 2022 as demand significantly outpaces capacity in an environment that will further drive up carrier profitability, according to Moody’s Investors Service.
“We expect financial performance to be even better in 2021 than it was in 2020,” the ratings agency said in a statement Wednesday. “Consumer and industrial demand for goods remains very strong while a limited supply of new vessels is entering the market.”
Moody’s expects the strong financial and operational performance to extend to the dry bulk and tanker sectors, prompting its decision to upgrade the shipping segment rating from stable to positive. The firm added that its base case scenario may even be too conservative with demand in all three sectors increasing and capacity remaining tight.
Global demand is forecast by analysts to outstrip container shipping capacity this year. Moody’s expects volume growth of between 5 and 7 percent against capacity growth of 4 percent; Clarksons Research Services is predicting volume growth of 5.7 percent with capacity growth of 4 percent; and IHS Markit, parent company of JOC.com, is forecasting 7.5 percent growth in container volume and 3.2 percent growth in capacity.
Simon Heaney, senior manager of container research at Drewry, told JOC.com landside disruption was expected “for most of 2021,” adding that the London-based maritime research firm has forecast demand to outstrip supply through 2022.
The supply-demand imbalance has been in the carriers’ favor for months. Operating profits of the 11 reporting carriers, measured in earnings before interest and taxes (EBIT), reached $16.2 billion in the first quarter, greater than the sum of the previous 10 first quarters combined, according to Sea-Intelligence Maritime Analysis.
The highly positive start to the year followed a calendar year 2020 in which operating profits for all container shipping lines, as calculated by Drewry, totaled $26.6 billion, up from about $5 billion in 2019.