SIMIC

Marcus Hand | Oct 07, 2021

Earnings before interest and tax (EBIT) for container lines in Q2 far exceeded expectations and major-listed companies have upped earnings forecasts for the rest of the year.

In the second quarter Drewry estimates that EBIT topped $39.2bn an 11-fold improvement on the same period in the previous year. It noted that higher bunker and charter costs had had little impact with every carrier it tracked increasing margins compared to Q1, some by more than 50%.

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Having forecast back in July that container lines combined profits could hit $100bn for 2021 as whole Drewry has now increased this EBIT forecast to what it describes as an “eye-watering” $150bn. Significantly looking at 2022 it says EBIT for lines “could be slightly more again”.

“To seasoned observers of the container market, typing these numbers on a page is frankly surreal,” the analyst commented in a Container Insight report.

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Container vessel supply lags behind demand until 2023 with port handling expected to increase 8.2% this year and 5.2% in 2022.

Looking at freight rates Drewry said:”Stronger than expected spot rate movement in 3Q21 and a longer supply chain recovery timeline are behind our reason to upgrade the outlook for average global freight rates (spot and contract) for 2021 to 126%, which is an upward adjustment from 47% in our June forecast.

“For 2022, spot rates are expected to decline, but there will be a significant increase in contract pricing, leading to an increase in average global pricing of about 6%.”