This article examines the recent performance of container shipping, shedding light on the significant drops experienced by companies such as Evergreen, Yang Ming, HMM, Maersk, and Hapag-Lloyd. While these declines may seem alarming, it is crucial to consider the historical context and the extraordinary growth witnessed in the preceding years.
The container shipping industry, known for its headline-grabbing figures, is currently grappling with double-digit declines. However, these percentages need to be interpreted within the broader context. The remarkable profits and volumes recorded in previous years, which were unprecedented in the industry's history, make the current declines appear substantial.
The continuous drumbeat of year-on-year declines in container shipping is expected to persist for a while. Most ocean carriers reached their earnings and average rates peak in Q3 2022, while import volumes to West Coast and East Coast ports followed different trajectories until mid-2022.
The Harpex Index, an indicator of container-ship charter rates, remained near its highs until August. However, as the industry surpasses these peak periods in 2023, the double-digit drops are likely to diminish, and in some cases, even turn positive.
The container shipping boom witnessed during 2021-2022 was an extraordinary occurrence triggered by the pandemic. To draw meaningful comparisons, it is essential to consider the unique nature of this anomaly. In contrast, commodity shipping experienced a similar surge during the 2003-2008 period due to China's rapid expansion in global trade. Investors learned from the losses incurred after the commodity shipping market downturn, emphasizing the importance of examining pre-boom and post-boom periods rather than solely focusing on outliers.
Contrary to the prevailing narrative of declines, there are positive indicators in container shipping. For example, the Port of Long Beach reported a substantial increase in import volumes for April compared to the recent low in February. Import volumes in April 2023 were relatively stable when compared to April 2019 and 2018. Moreover, companies like HMM, Evergreen, Maersk, and Hapag-Lloyd have witnessed notable improvements in net income and freight rates in the first quarter of 2023 compared to pre-COVID figures.
Container lines and cargo shippers were taken by surprise by the unprecedented rate spike during 2021-2022, much like the boom experienced in commodity shipping from 2003 to 2008. Investors who entered the shipping market after the global financial crisis made flawed assumptions based on the reversion to the mean thesis. However, the inclusion of outlier years in their analysis distorted the mean, leading to significant losses. It is crucial to adopt a more balanced approach, considering a longer time frame that excludes peak earning years to avoid such biases.
The container shipping industry is currently facing double-digit declines, primarily due to the exceptional growth recorded in preceding years. As the sector moves beyond the peak periods, the declines are expected to subside, with the possibility of positive shifts.