2021: Shipping’s Year of Fame
In his new book, Outside the Box, Marc Levinson aptly defines our modern era as the “age of stuff.” We literally populate the four walls that we call home with furniture, electronics and garments shipped from distant lands.
But historically, the industry that has been behind the 80 percent of our trade has remained a hidden sector, rarely noticed by the masses it graciously serves.
Three months into 2021, tragedy struck. A giant ship, the Ever Given, was stuck in the banks of the Suez Canal. It would mark the start of a series of events that catapulted shipping into mainstream media limelight. For the six days the vessel remained stuck, it was a source of amusement to many people who had previously been unaware of the existence of these exceptionally large vessels.
On the other hand, the close-knit shipping community had a lot of cause for worry. The blockade that Ever Given caused at the Suez Canal exacerbated congestion at major global shipping hubs. In some localities, particularly in China, port logjams were also worsened by Covid-19 protocols that were meant to reduce spread of the virus.
Consequently, major container hubs like Los Angeles/Long Beach, Ningbo and other gateway ports in Europe and Asia had a record-breaking snarl-ups. The delays were so severe that retailers were unable to stock many consumer items in time, and manufacturers with long global supply chains had difficulty sourcing parts.
The empty shelves of grocery stores have been a huge concern for many Western shoppers, and images of vacant displays became a regular feature on prime time news. At the same time, astronomical freight rates drove prices up for consumer goods in destination markets, pushing shipping further into the public consciousness. According to the latest freight rate report by Xeneta, the rates of European imports in December have spiked by 141 percent compared to end of 2020. As for the USA, import freight rates have surged by 125 percent compared to end of last year. For the everyday shopper, this translates into across-the-board price increases for imported goods, resulting in inflation. Last month, UNCTAD predicted that the surging global container shipping rates could send consumer prices 1.5 percent higher over the next year.
This cuts deep for the many people who were hurt by the COVID economic downturn – and even for people who have secured higher wages in an economic rebound. “Although the gross pay has increased 4.8 percent over the past one year, the real average hourly earnings accounting for inflation declined another 0.4 percent for November and are down 1.9 percent for the 12-month period,” said the US Department of Labor in a December report.
When on December 6, The New Yorker magazine featured a container ship on its cover - only the fourth time in 100 years it has showcased a vessel - shipping enthusiasts saw it as a deserving tribute for a vital industry. It was a year for the record books: after all, who ever thought that revenues of container shipping would ever compare to those of the biggest technology companies? In November, investment firm Blue Alpha Capital noted that container shipping profits in Q3 had exceeded the earnings of Facebook, Amazon, Netflix and Google (collectively known as the big four “FANG” companies).
“The $48.1 billion in 3Q21 container shipping profits was almost 50 percent higher than total FANG profits and the 42.7 percent net income to revenue margin was almost three times higher. Compared to earnings behemoths Apple and Microsoft combined, container shipping industry profits were still almost 15 percent higher with a profit margin that was almost 30 percent higher,” wrote Mccown.
The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.