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Prices on consumer goods have surged to 31-year highs as retailers face a very real supply chain crisis ahead of the holiday season. But one group is profiting off of Christmas woes and celebrating with very stuffed stockings: shipping container companies.
Container shipping pre-tax profit for 2021 and 2022 could be as high as $300 billion, according to Drewry, an independent maritime research consultancy. In 2021, the industry is forecast to make $150 billion. That’s a new record. In 2020, the industry brought in $25.4 billion, according to The Journal of Commerce. And even though 2021 has been a banner year, Drewry expects the industry to make even more in 2022.
“To seasoned observers of the container market, typing these numbers on a page is frankly surreal” Drewry wrote in its Container Insight Weekly analysis on the industry. “Stronger-than-expected spot rate movement in the third quarter and a longer supply chain recovery timeline are behind our reason to upgrade the outlook for average global freight rates — spot and contract — for 2021.”
Those eye-popping numbers might be because container companies like Maersk are taking advantage of strong demand in ports, and raising freight prices to new highs. Dewry expects average global rates for Q4 to increase by 126% above those in Q3.
As ports and terminals experience delays due to the breakdown in the supply chain, they have essentially become parking lots for ships and boxes, allowing container and shipping line companies to continue to charge fees as they wait. Soaring demand for containers and shipment, meanwhile, has led to rapid and drastic fee increases.
AP Moller-Maersk A/S, the world’s biggest container shipping line, is now expected to make $17 billion in operating profits in 2021, up from predictions of $4.5 billion at the beginning of the year. That’s a 278% increase. The company announced this week that it would be giving each of its 80,000 employees a $1,000 bonus to celebrate.
“In a massive team effort our colleagues across the globe have risen beyond the call of duty to respond to our customers’ needs,” Chief Executive Officer Soren Skou said in a memo leaked to Bloomberg. “And this has not been easy given the unknowns and disruptions that we had to deal with, the impacted supply chains, congestions, and capacity shortages.”
Other shipping companies also have reason to celebrate: Germany’s Hapag-Lloyd AG reported more in earnings over the past six months than they did in the last 10 years combined.
Those profits will give container line companies "an extraordinary war chest to play with,” said Drewry.
But that doesn’t mean they’re working on improving productivity.
The record-breaking profits were accompanied by record-breaking slowdowns. Sea-Intelligence Maritime Analysis reports that on-time performance of shipments between Asia and North Europe fell to 23.5% this summer, down from 90% in 2019. Trans-Pacific ocean carrier reliability, meanwhile, fell to 9.9%, down from 80% in 2019.
The slowdown is largely because of port wait times.
“It is not carriers’ fault that because ports keep them waiting, sailing schedules are in disarray, and access to container equipment is limited,” Drewry wrote. “Nor is it the fault of ports and terminals that they have become parking lots for ships and boxes, because COVID-19 made them less able to turn boxes efficiently and then have them cleared from site quickly due to fewer truck drivers and low warehousing space.”
President Biden is working with major ports in the U.S. to fix slowdowns, and reported in November that the U.S. Army Corps of Engineers will begin $4 billion worth of construction work at aging coastal ports within the next two months.
This story was originally featured on Fortune.com