Those who find it difficult to justify price increases on durable consumer goods such as white goods, televisions and electronics solely on the rise in the cost of energy and microprocessors, can only take a look at shipping costs.
And how they turn into tens of billions in profits for shipping companies.
Analysts monitoring the regular container shipping industry, such as Xeneta and Drewry, forecast record profits of 2021 to $ 120 billion, respectively, depending on how many companies each includes in their calculations. In addition, Drewry estimates that in 2022 this profitability, which relates to operating profits, will be further enhanced, to the level of $ 200 billion. It is perhaps characteristic that already the profits of the third quarter of 2021 of the companies monitored by the Xeneta Shipping Index (XSI) are higher than what the same companies did throughout 2020.
The German container shipping company Hapag-Lloyd, the fifth largest in the world, announced earnings before interest, taxes, depreciation and amortization of $ 12.8 billion for 2021. Its corresponding performance in 2020 was 3.1 billion.
On February 9, the second largest regular airline company in the world, the Danish Moller-Maersk, will announce the profits for last year. Moller-Maersk has already revised upwards its estimates for 2021 three times and now sees earnings before interest, taxes, depreciation and amortization between $ 22 billion and $ 23 billion, up from $ 8.3 billion in 2020. At the same time, it expects free cash flows of at least 14.5 billion compared to 4.6 billion in 2020.
It is this abundant liquidity enjoyed by these companies that has enabled the Italian-Swiss MSC to engage in a long series of container ship acquisitions over the past year, climbing to number one in the world with a share of 17.1% vs. 16.9% of Maersk, according to Alphaliner. It is this very liquidity that allows MSC to currently seek the acquisition of Alitalia’s Italian airline ITA Airways in partnership with German airline Lufthansa.
Slightly lower in the ranking with the regular shipping lines and specifically in the sixth place with a share of 6.1% is Ocean Network Express, which the day before yesterday increased its forecast for the profits of 2021 to 15.4 billion dollars. Its previous forecast in October spoke of 11.7 billion.
The strong demand for transport, in an environment characterized by global supply chain problems caused by the first wave of the pandemic, combined with the finite number of container vessels, has skyrocketed daily fares in this category of shipping.
According to Simpson Spence Young (SSY), at the beginning of 2021, a 15-year-old container carrier with a carrying capacity of 5,500 TEU (equivalent to 20-foot containers) changed hands at a price of about $ 20 million. Twelve months later, smaller ships of the same age have been sold for more than 70 million.
“It’s not difficult to understand why,” adds SSY: the average daily fare for ships of this size and age in 2017 and 2018 was close to $ 15,000, to rise to 20,000 per day in 2019 and 2020 The same ships are currently chartered for amounts well in excess of $ 100,000 a day, he explains.
Thus, importers of products, including of course the Greeks, which are transported to Europe from Asia and elsewhere in containers, face huge increases in transport costs, many of which are extorted or even attempted to pass on to final consumers.
The larger the product, the greater the increase, since the extra cost is divided into fewer units compared to the smaller products. So among the first things that have become more expensive are, for example, white appliances but also televisions and laptops.
In the latter products, of course, prices have risen also due to the lack of microprocessors in the global market, which has created problems for thousands of producers, including the automotive industry. Thus, a 55-inch TV that was sold at the end of 2020 in the Greek market at the level of 400 euros, today (exactly the same model of the same company) is sold for about 600 euros. The price behavior for computers is similar.
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