Increased Demand, Increased Profits
The global supply chain continues to be a mess. There are delays in ports around the globe and backlogs at every step of the way. Shipping costs are 20 times more per container than before the pandemic. However, expenses for shipping lines have remained relatively constant. This translates to one of the most profitable periods ever for a historically low-margin industry.
So, what are the world’s largest shipping companies doing with their newfound pandemic profits? A whole lot, it turns out. The industry leader, Maersk, is investing their war chest in every step of the supply chain. Other firms are diversifying their business by expanding into adjacent industries. The one thing they all have in common is an interest in shoring up their future before profits return to normal.
Investing Pandemic Profits in Shipping Lanes
The Evergreen Group is doubling the size of their fleet after dropping $2.6 billion on 20 new ultra-large containerships; even the globally bad press from the Suez Canal blockage was not enough to sink this Taiwanese-based conglomerate. The privately held Mediterranean Shipping Company is taking advantage of their boost in profits to make one of the largest secondhand cargo ship purchases ever. They hope their addition of 60 secondhand cargo ships to their fleet will be enough to overtake Maersk as the largest shipping company in the world.
Speaking of Maersk, the Danish company is opting for quality over quantity with their fleet and ordering eight carbon neutral vessels to be delivered by 2024. Part of the draw of green vessels for Maersk is the zero carbon ambitions of their clients, like Unilever, Amazon, and Proctor & Gamble. CMA CGM echoes this philosophy with their $627 million spend on ice-breaking cargo ships that can travel the more environmentally friendly routes of the Baltic Sea.
Expanding Airline Fleets
Major shippers are taking “by land, by sea, by air” to heart and pouring money from their pandemic profits into increasing their air delivery capacity. CMA CGM has announced intentions to expand their airbus fleet with a purchase of four A30F freighters at the recent Dubai Air Show. This represents a further commitment to air from the French shipper by tripling the previous size of their cargo airline.
As mentioned earlier, Maersk is sitting no part of the supply chain out and that includes airfreight. Combined with leases and other company acquisitions, they have essentially doubled the size of their airline fleet since this time last year. The two new Boeing 777s, which will serve as the crown jewels of the fleet, are expected to be delivered by 2024.
Diversifying the Shipping Industry
Part of many shipping companies’ plans for the future involve expanding their portfolios to keep profits on the rise, even when margins return to their typical pre-pandemic levels. Maersk is securing their future with the purchase of German-logistics expert and freight forwarder, Senator International. They are also capping off their shopping splurge with a $5 billion stock buyback.
Mediterranean Shipping Company has placed a large bet on their cruise division by ordering 12 new ships to be delivered from now until 2027. This purchase also includes the launch of a luxury cruise brand from MSC to set sail in 2023.
Finally, Hapag-Lloyd is taking a different approach from all of their competitors. Instead of investing in increasing their capacity, they are using their pandemic profits to purchase sea and rail terminals. If their belief that these port blockages are a one-time issue is correct, this is a wager that could pay huge dividends for Hapag-Lloyd.
How SiShips Gives You The Advantage
Sheltered International combines expertise with state of the art software to bring you quality domestic and international shipping solutions. SiShips puts the shipper in control, offering efficient and cost effective ways to ship your product.
To learn more about managed transportation with SiShips, or to view a demo of our software, contact us today.