Published Dec 27th, 2024 by Alphaliner
2024 is on track to be third most lucrative year in container ship history despite the higher costs born by container carriers to divert tonnage around the Cape of Good Hope.
At the nine-month stage, net profits for the leading carriers are already above the full-year results for both 2020 and 2023, the only other years to come close to this year’s performance outside of the peak COVID periods of 2021 and 2022.
Significantly higher expenses as a result of the hostilities in the Middle East have not prevented carriers from generating large profits. Diversions around the Cape of Good Hope have led to a near 20% increase in ton-miles year-on- year, pushing expenses up in many categories for lines particularly in the area of fuel and container handling.
In January-September, number two carrier Maersk registered a 23% year-on- year increase in bunker costs directly related to the re-routing of its ships, after burning 8.5 million tonnes of fuel, a 16% rise on the same pre-Houthi attacks period in 2023.
With no end in sight to the conflict, Maersk’s Gemini Cooperation with Hapag- Lloyd will launch directly in February with Cape re-routings. It is now almost exactly one year since the Red Sea crisis began.
The introduction of the EU Emissions Trading System (ETS) on Janu- ary 1 has also added another smaller boost to carrier expenses, with Maersk paying just under USD 130 M towards carbon offsets so far this year, with no equivalent expense last year.
Container handling represented the other main area with significant cost pressure for carriers, as the crisis in the Red Sea resulted in more transhipment of cargoes to their ultimate destination. Mean- while, congestion at alternative ports also brought more storage fees, while repositioning costs for empty boxes also rose.
A silver lining: carriers were able to lower their costs in one area. With far fewer Suez crossings, lines were able to make significant savings on the frequent +USD 1 M cost of a Canal transit, not to mention the price of war-risk insurance. In several cases, these savings compen- sated for carriers’ higher charter and slotting costs in 2024.
With the latest results, it confirms that carriers remain in an extraordinary 5-year profit cycle, and that the advantage of longer trading distances in mopping up excess newbuilding tonnage has far out- weighed the negative impact of higher costs.
Carriers face mixed bag of cost changes
Operating expenses have grown by varying degrees for carriers, depend- ing on their trade concentration.
The two major European carriers, Maersk and Hapag-Lloyd, both recorded a 7% increase in total transport costs over the first nine months of the year.
Bunker costs represented the largest increase, driven by longer distances and higher volumes. These rose 23% and 19% respectively for Maersk and Hapag-Lloyd.
Operationally, Hapag-Lloyd estimates that while teu volumes will ultimately grow by 5.5% over 2024, teu-miles are likely to grow by an impressive 18%.
Carriers have also added the cost of CO2 emission certificates for the first time.
Meanwhile, extra transhipment activity linked to the Red Sea crisis pushed up container handling costs by 6-7% for both Maersk and Hapag-Lloyd, as carriers were forced to adapt their networks in order to get cargo to its final destination.
There was some good news for carriers, however. While charter rates and vessel slot costs have risen sharply this year, vessels and voyages/ network expenses dropped for both carriers.
This is largely due to the reduction in both port and canal toll costs linked to fewer Suez Canal crossings.
On the administrative side, personnel costs are also believed to have in- creased for carriers following inflationary pressures on wages.
Maersk managed to lower Selling, General & Administrative (SG&G) costs, however, by 14% reflecting better productivity.
Leave a reply