Container Shipping Still Poised for Profitability in 2023
With a normalized container shipping market, the first quarter of 2023 saw a significant drop in profitability for most shipping lines. It was the third quarterly downturn following seven straight quarters of record income during the Covid-19 pandemic.
However, in a new analysis by shipping expert John McCown, 2023 will remain a profitable year for container shipping despite the current financial decline. The industry had a net income of $13 billion in 1Q2023, a decrease of $45.7 billion and 77.9 percent from the $58.7 billion profit in the same quarter a year ago.
But considering net income as a percent of revenue, the current performance is way much above the industry average in pre-pandemic years. According to McCown’s estimates, in the four years from 2016 through to 2019, the container shipping industry experienced a cumulative loss of $8.5 billion on revenues of $681.2 billion for a negative 1.3 percent margin on net income to revenue.
To put this into context, the net income as a percent of revenue was 20.9 percent in 1Q23, despite the media hype for record profit decline during the period. If compared with other transport companies that historically would be at the top of container shipping, the margin was 2.5 times higher than their level.
For instance, the combined net income of well-regarded companies in the transport sector such as UPS, Fedex, Union Pacific and JB Hunt in this year’s first quarter was $4.5 billion, barely one third of the earnings of the liner shipping.
“While I anticipate the sector margins will continue to decline as the 2023 quarters unfold, my estimates still have them staying above 10 percent throughout the year,” commented McCown.
Meanwhile, although there has been immense attention to the reduced demand in container shipping, the worldwide loaded TEU volume of 39,975,913 in the first quarter was down just 4.1 percent compared to the fourth quarter last year.
However, the U.S loaded container volume of 7.1 million TEUs showed larger declines with a 17.5 percent year over year decrease and a 6.4 percent decline compared to the fourth quarter, according to data from Container Trades Statistics (CTS).