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Shipping Companies Are Taking Advantage of Pandemic Profits

Shipping Companies Are Taking Advantage of Pandemic Profits

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.pandemic profits maersk shipping cargo freight industry invest airbus airline supply chain

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.

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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.

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Why Your Company Should Use Periodic Monthly Statements

How Sheltered International Makes Filing Duty Payments Easier for Your Business

From saving you time to improving your cash flow, using the Periodic Monthly Statement (PMS) process can offer significant benefits to your business. PMS has no additional cost and allows your business to pay duties monthly in a single payment, instead of for each individual transaction. Combined with our tracking and reporting software SiShips, your business can enjoy simplified reporting and accounting and a greater sense of control when it comes to duty payments.

 

How Do Periodic Monthly Statements Work?

Periodic Monthly Statements track entry activities throughout the month to provide a single monthly statement. This structure also extends the payment window. While when paying per shipment, the importer must pay duties within 10 business days, PMS offers the importer 15 business days after the end of each cycle to pay. For example, the duties on goods imported between July 1 and July 31 will be summed at the end of the month. The monthly payment is then not due until the fifteenth business day of the following month – in this example, August 21.

With this additional time, your business can extend cash flow by up to 54 days. The single payment not only makes it much easier to track your finances, but also offers significantly more control over your working capital.

How Can My Business Use PMS for Duty Payments?

Get started with PMS by filling out an application and sending it Sheltered International to review and submit to Customs. In a few weeks you will receive a Payer Unit Number (PUNS) from Custom’s ACH team. Once received, you must forward your PUNS number to Sheltered to complete the activation.

How Can SiShips Help?

To streamline the process even further, our software SiShips generates a duty summary (7501) for each entry throughout the month for accounting and record-keeping. Once the month has closed, a final statement will be provided to review before Customs pulls the duty on the 15th business day the following month. These reports can all be easily accessed through our software. That’s less time that you have to spend on accounting and more time you can devote to supporting your customers and growing your business.

With greater control over your cash flow and a simplified payment process, it’s clear that PMS can be valuable for you and your business.

To learn more about how Sheltered International can help finesse your freight forwarding experience, contact us today.

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Phase One of US-China Trade Deal Reduces Tariffs

Chinese and American Exports See Decrease in Duty Rates

As part of a Phase One Economic and Trade Agreement between the United States and China, signed on January 15, 2020, both countries have halved tariffs on many imported goods. The relevant duty reductions were applied on February 14, 2020.

China’s reductionsus-china trade deal will affect only the extra tariffs put in place on American imports last September. Tariffs on U.S. crude oil will drop from 5% to 2.5%, while total duties on soybeans are reduced from 30% to 27.5%. In total, this will affect roughly $75 billion of exports from the United States. China’s Ministry of Finance announced the reduction and stated it was designed to “advance the healthy and stable development of China-U.S. trade.”

Similarly, a White House spokesman stated the China trade deal “protects American innovation and creates a level playing field for our great farmers, ranchers, manufacturers, and entrepreneurs.” As of February 14, the U.S. has cut duty rates from 15% to 7.5% for a wide variety of goods, including any imports which fall under List 4A. These Chinese imports account for about $120 billion of goods. For List 4B, planned additional duties of 15% have been suspended. However, an additional $250 billion of goods will retain a 25% tariff, including Lists 1, 2, and 3.

For updated duty rates for all lists, see STR Trade’s compilation.

Effects of the China Trade Deal

International trade relationships with China have also been recently affected by COVID-19, which has shut down factories, seriously reduced the efficiency of ports and delayed supply chains across Asia. Former Macy’s CEO Terry Lundgren has stated that the combined effects of coronavirus and the Chinese trade war have revealed the retail supply chain’s potentially detrimental reliance on China. Similarly, American technology companies including Apple and Google are looking to reduce their reliance on China’s production. Supporters of the administration’s efforts agree that the trade war was a necessary step in forcing a shift away from dependence on Chinese production.

Most business leaders, including executives from Goldman Sachs Group Inc., Intel Corp., and Boeing Co., are in favor of the new trade agreement, though they hope these negotiations will continue.

In contrast, the deal has been criticized as being harmful to privately-owned businesses in China who can’t afford the more expensive American imports, allowing state-owned enterprises more market power. Additionally, as the agreement requires China to purchase $200 billion of American goods within two years, government-subsidized SOEs are likely to increase their share of imports. Critics of the China trade deal say this is counterintuitive to the Trump administration’s focus on reducing SOE’s influence over the economy. Trump trade advisor Peter Navarro has stated that these state-owned enterprises will be the target of “phase two” trade talks.

Stay Up-to-Date with Tariff Changes

SIShips makes it easier to keep track of international trade shifts and how they might affect your shipments.

Learn more about how SIShips can simplify your freight experience.

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