Normal box shipping unlikely to return this year with port congestion: Fitch

AMERICAN credit rating agency, Fitch Ratings, is calling for another solid year for container shipping industry earnings as port congestion will continue to prevent a return to pre-pandemic levels, according to gCaptain of Ventura, California.


For shippers, this means high shipping costs and supply chain challenges are here to stay, at least in the near-term.


Normal box shipping unlikely to return this year with port congestion: Fitch
Normal box shipping unlikely to return this year with port congestion: Fitch

The container shipping industry earned a "mind-bending" US$59 billion in profits in the first quarter of 2022 - a new record - as the industry to benefit from stronger pricing.


Container shipping company profits are likely to have another very strong year in 2022 as freight rates remain high despite moderate easing these last three months, the credit ratings agency said in a global container shipping update issued recently.


High freight rates along with buoyant demand have led to an increase in the fleet orderbook, which is about 26 per cent of the existing fleet, compared to less than 10 per cent at the beginning of the pandemic, Fitch said. However, the industry could be headed for a turning point in 2023, when growth in vessel capacity is likely to exceed container demand.


"The capacity deployment discipline during the peak periods of pandemic-related lockdowns in 2020 was partly the result of industry-wide consolidation in the previous decade, as it reduced the need to gain market share. However, whether this discipline holds with the arrival of new fleet remains to be seen. Some of the excess cash from the ongoing bumper profits has gone to debt reduction, but increased capex, shareholder returns and bolt-on acquisitions have been the other uses across the industry," Fitch said.


Fitch sees acquisitions as a result container shipping companies' push to become door-to-door logistics providers as being good for the longer-term growth and stability of the industry.


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