After six consecutive quarters of declining profits, container shipping lines rebounded in the first quarter of 2024, supported by geopolitical turmoil.
Container shipping lines' earnings have been on a downward trend since the peak rate hikes triggered by the new crown epidemic in the second quarter of 2022 (April ~ June). This downward spiral has resulted in a net loss for the largest container lines in the last quarter of 2023, and revenue forecasts anticipate severe losses in 2024.
However, according to the McCown Container Results Observer, total container shipping line profits rebounded in the first quarter of 2024, from a loss of $700 million in the fourth quarter of 2023 to a profit of $5.4 billion in the first quarter.
The main supporting factors for container shipping lines' profits were the disruption to Red Sea shipping, the subsequent rerouting of vessels and higher freight rates due to the absorption of excess tonnage - a factor cited in individual earnings reports and many market updates and analyses since the end of 2023.
McCown said, "(Asia to Europe) routes account for around 25 per cent of global container miles, and a one-third increase in a typical voyage would result in an 8 per cent contraction in global capacity."
Changes in global trade flows have led to congestion in some Asian ports because of higher trade volumes and changing patterns affecting the infrastructure and inland operations in some areas.
The report noted that increased volumes had a favourable impact on earnings, with the first quarter of 2024 up 9.2 per cent year-on-year, the strongest quarterly growth since the epidemic.
In the second quarter, the market's outlook for container shipping lines continued to be optimistic, with spot container rates rising by more than 30 per cent in recent weeks as the peak season approached. Analysts also note that contract renewals will be difficult due to market uncertainty, as the current tight capacity is balanced by potential oversupply if the Red Sea situation eases.
Each shipping line will take its own approach to managing the risks in the Red Sea, but Maersk said it would continue to sail through the Cape of Good Hope for the foreseeable future.
On a full-year basis, profits for the 12 months to March 2024 were $16.4bn, down from $171.1bn in the first quarter to 2023, McCaughan said.
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