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Container Companies Book Record Profits Despite a Challenging Year in Logistics
Bloomberg writes that logistics companies such as Maersk and Evergreen together made a profit of 150 billion dollars (133 billion euros) in 2021. That is nine times more compared to 2020 and is quite remarkable because the past year was characterized by container shortages and many delays in deliveries.
The corona crisis has led to an unprecedented infarction in container shipping. At the beginning of the crisis, the world economy came to a standstill overnight and a lot of containers had to be put aside. Entire ports even closed because there was no more work anyway.
But demand picked up faster than expected and ports and container suppliers could no longer keep up with the sudden sharp increase in demand. In addition, some containers were left in the wrong ports, and, especially in China, some ports had to close again due to corona infections. All this together has led to immense backlogs, as a result, suppliers pay up to seven times more for a container than at the end of 2020.
Yet it now appears that container companies have made record profits in the past year, after decades of almost no profit on the books. It is logical that prices rise when there is scarcity, but that profits are ultimately made during such a difficult period raises some eyebrows.
Did container companies deliberately create a scarcity?
"Logistics companies performed poorly in 2021 and yet earned very well. That indicates that they have benefited from the situation," says Bart Kuipers, port economist at Erasmus University Rotterdam. He refers to a study by Rabobank which shows that 10 percent of the containers are still empty for no apparent reason.
"A lot of empty containers are sailing around anyway because they have to be transported from the wrong port to the right port, but if it were true that 10 percent of the containers are deliberately left empty, that is a clear strategy to create scarcity," says Kuipers.
Competition watchdogs from the EU, China, the United States, and the United Kingdom have investigated the price increases in recent months, but all found that container companies have not taken anti-competitive measures.
Container prices have been exceptionally low in recent years
Over the past twenty years, there has been an oversupply of containers and ships, which has left carriers able to charge almost nothing for their services. Today, that has completely flipped to the other side, but economists expect this will soon lead to an equilibrium.
When that happens, however, it is hard to say. "There are signals in the market that the problems will not be solved until next year at the earliest and probably only in 2025," says Kuipers. "Until then, prices will probably remain relatively high, although they are now somewhat lower than at the start of the crisis."
He expects that there will be more takeovers in the logistics world in the coming years, and those container companies will do more themselves. Maersk, among others, has already bought smaller ships and has a lot of vacancies. "If one company takes care of the entire logistics chain, that will lead to more efficiency and stability, and that automatically leads to lower prices."
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Erasmus University Rotterdam