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Container Shipping Industry Bounces Back with $5.4 Billion Profit in Q1 2024

Mike Schuler
Total Views: 1037
May 22, 2024

The container shipping industry has reported profits of $5.4 billion in the first quarter of 2024, marking an impressive turnaround following six consecutive quarters of decline, according to liner industry expert John McCown.

This reversal has been largely attributed to increased rates from Red Sea diversions and stronger-than-expected volumes.

According to John McCown, longer voyages due to Red Sea diversions have led to a reduction in global capacity by 8%. At the same time, there was a 9.2% rise in volumes in the first quarter of 2024, compared to the same period last year.

McCown pointed out that the unexpected increase in volume significantly bolstered rates, but it’s the Red Sea situation that is proving to be a pivotal factor behind the recent surge in price strength.

The industry’s recovery comes after a period of decline that lasted six quarters, from a high point of $63.1 billion earnings in Q2 2022 during the pandemic-induced boom. McCown characterizes this decline as “even faster and steeper than the climb to reach peak earnings.”

Net income by quarter. Chart courtesy Blue Alpha Capital

The recent reversal follows a streak of seven consecutive quarters of record-setting net income for the industry. “Just as pricing drove those roller coaster results, it drove the latest quarter. The difference is that the catalyst for the latter was pricing increases emanating out of the Red Sea,” McCown noted.

McCown’s report also underscores the significant impact of the pandemic, which “materially changed” the supply/demand dynamic that influences sector pricing. This followed a prolonged period of chronic overcapacity that dates back to the 2008 financial crisis.

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