What conclusions can you draw for 2023 shortly before the end of the year?
In general, we have seen further market growth in the current year. Not only the global transport volume, but also the worldwide fleet capacity has continued to increase and is expected to reach 30 million TEU in 2025. This is six times as much as in 2000 and represents growth of 25.0 million TEU in 25 years. At the same time, the consolidation of the market has progressed further. There are only ten “global players” left, organized in three alliances. All others are “niche providers” or “regional providers”.
Who were the major beneficiaries of this growth?
The shipowners and carriers had successful start into the year 2023, with good profits in the first half. However, third-quarter results show that the new market reality has finally caught up with liner shipping. Average operating margins are now down to only 1.5% and some carriers have already posted negative margins for the third quarter. More carriers are expected to slip into the red next year. This is because freight rates have returned to pre-Covid levels, but costs have risen significantly in comparison.
Where did the profits go?
On the one hand, the expansion of transport capacities was driven forward, partly due to the need to equip ships with sustainable technologies. At the same time, many ocean carriers used their profits to buy into “everything” at inflated prices: ship owners, lessors, ports, container terminals, airlines, logistics, warehousing, etc. As a result, the prices for these assets have risen significantly, which in turn has made many stakeholders in the industry “unhappy”, who have been unable or unwilling to pay these prices.
Keyword sustainability: where is the trend going here?
The green transformation of fleets is on its way, both in terms of the design and equipment of ships and regarding fuels. However, the challenge of decarbonization has shifted from ships to the strategic procurement of sustainable fuels. By 2024, around half of all ships entering the market will be powered by alternative fuels such as LNG, methanol, and ammonia. These associated changes will cost billions. Ultimately, however, freight owners and consumers will have to foot the bill.
And what else can we expect in the next few years?
That’s difficult to say. As we have seen, the logistics sector is very dependent on geopolitical developments. However, it is very likely that rising energy costs will contribute to freight rates rising again in the long term. I also expect that, despite increasing scrapping, the tonnage market will still have chronic overcapacity for several years to come.
On top of that we already know that the carrier alliances will go through changes after 2024. Maersk and MSC will dissolve the 2M and, considering the massive orderbooks of CMA CGM, COSCO and Evergreen, there is a chance that one member of the ‘Ocean’ alliance could also break free and become a standalone operator.
But let’s just see what happens. In any case, 2024 will certainly be another very exciting year.
