How the world’s big shipping lines are spending their pandemic profits

How the world’s big shipping lines are spending their pandemic profits
Nicolás Rivero November 23, 2021 https://qz.com/2093954/how-big-shipping-lines-are-spending-their-pandemi...

The world’s largest shipping lines are reaching the peak of their most profitable run in history. Now, they’re starting to decide how they’ll invest the billions of dollars they’re raking in each quarter.

Supply chain chaos—brought on by pandemic disruptions to ports, factories, and consumer spending—has allowed shipping lines to charge their customers 20 times more per container than they did before the pandemic. But their underlying expenses haven’t changed much allowing cargo carriers to keep almost all of the price increase as profit.

Before the pandemic, shipping was a cutthroat, low-margin business in which carriers competed fiercely to slash prices and attract customers. Most businesses veered between losing money and eking out a narrow profit each quarter. Within about two years, analysts expect shipping rates will return to normal levels and shipping lines will go back to low profits and lean budgets.

Before that happens, many shipping lines have decided to use their pandemic profits to expand into new, potentially more lucrative lines of business, like cruise ships and cargo planes. Others are simply trying to grow as big as they can with their newfound cash to gain an edge on the competition.
Maersk buys a piece of every step in the supply chain

The world’s largest shipping line is no longer content to just be a shipping line: Maersk has ambitions to control each stage of supply chain logistics, from ships to planes to trucks to warehouses. This year, the company has bought:

Two new Boeing 777 cargo jets to add to its budding cargo airline’s existing fleet of 15 planes
16 new electric trucks to add to its fleet of 215 vehicles
Eight carbon-neutral ships for $1.4 billion
Two warehouse and logistics companies that operate ecommerce fulfillment centers in the US and Europe
Senator International, a “freight forwarder” that acts as a broker between shipping companies like Maersk and their customers
$5 billion worth of its own stock, in a massive share buyback program announced in May

Mediterranean Shipping Company expands its cruise line

The private, family-run business doesn’t report quarterly profits—but it has been on a buying spree that could help it overtake Maersk as the world’s largest shipping line. In the past year, it has bought:

About 60 second-hand cargo ships, with at least 43 new ships on order
12 new cruise ships, at a price of $11.3 billion, which will make MSC the fastest-growing cruiseline over the next five years

In February, the world’s third largest shipping company launched an airline to carve out a piece of the air cargo business, which has also seen rates and profits soar during the pandemic. This month alone, it has bought:

Four new Airbus cargo jets, to expand its nascent fleet of six freight planes
10 ice-breaking container ships to expand its presence in the Baltic Sea
A $2.3 billion container terminal at the Port of Los Angeles

Hapag-Lloyd has decided to use its pandemic windfall to buy up port terminals, many of which have been overwhelmed by cargo traffic during the pandemic. Company CEO Rolf Habben Jansen has said the company isn’t interested in air cargo, freight forwarding, or warehousing like some of its rivals—but it’s always open to buying another terminal. Since the pandemic began, it has bought:

A 30% stake in the deepwater port and a 50% stake of the railroad terminal at Wilhelmshaven, in Germany
A 10% stake in a container terminal at the port of Tanger-Med in Morocco
Six gargantuan 23,500-container ships for $852 million
10 smaller 13,000-container ships for $1 billion

Evergreen, the world’s seventh largest shipping line, is looking to rise up in the rankings. The company has gone on the biggest ship-buying spree relative to its size of any shipping line; when its orders are filled, it will have roughly doubled the size of its cargo fleet (and leap-frogged Hapag-Lloyd to become the world’s fifth largest shipping line). This year, it has bought:

24 new ships for about $1 billion in September
2 new massive 24,000-container ships in June
20 new 24,000-container ships in March for $2.6 billion