The global shipping industry is getting its biggest payday since 2008 as the combination of booming demand for goods and a global supply chain that is collapsing under the weight of Covid-19 drives freight prices ever higher.
Whether its giant container ships stacked high with of 12-metre steel boxes, bulk carriers whose cavernous holds house thousands of tonnes of coal, or specialised vessels designed to pack in cars and trucks, earnings are soaring for ships of almost every type.
With the merchant fleet hauling about 80 per cent of world trade, the surge reaches into every corner of the economy. The boom back in 2008 brought with it a huge wave of new vessel orders, but the rally was quickly undone by a demand collapse when a financial crisis triggered the deepest global recession in decades.
This boom’s causes are twofold – an economic reopening after Covid that has spurred surging demand for goods and raw materials. Alongside that, the virus continues to cause disruption in global supply chains, choking up ports and delaying vessels, all of which is limiting how many are available to haul goods across oceans. That has left the majority of the shipping sector with bumper earnings in recent months.
The bonanza is centred around container shipping – where rates are spiralling ever higher to new records – but it is by no means limited to it. The shipping industry is posting its strongest daily earnings since 2008, according to Clarkson Research Services, part of the world’s biggest shipbroker. The only laggards are the oil and gas tanker markets, where more bearish forces are at play.
“I’m not really sure the perfect storm covers it – this is just spectacular,” Peter Sand, chief shipping analyst at trade group Bimco, said. “It’s a perfect spillover of a red-hot container shipping market to some of the other sectors.”
Container shipping remains the star. It now costs $14,287 to haul a 12-metre steel box from China to Europe. That is up more than 500 per cent on a year earlier and is pushing up the cost of transport everything from toys to bicycles to coffee.
Those gains are already showing in the earnings of AP Moller-Maersk, the world’s largest container line, which hiked its estimated profits this year by almost $5 billion last month. In a sign of just how profitable the industry has become, CMA CGM SA – the world’s third largest carrier – said it is freezing its spot rates to preserve long-term client relationships. In other words, the company is turning away profit.
While the demand for retail goods is lifting container markets, a recovering global economy is also churning through more raw materials – boosting the revenues of bulk ships that carry industrial commodities. In that sector, earnings recently hit an 11-year high and are showing little sign of abating down the line with consumption expected to remain firm for the rest of the year.
“Strong demand for natural resources combined with Covid-related logistical disruptions” are supporting spot and future freight rates, Ted Petrone, vice chairman at Navios Maritime Holdings, which owns a fleet of bulk carriers, said on an earnings call last week. “Supply and demand fundamentals going forward remain extremely positive”.
Such is the extreme strength across shipping that some bulk carriers have even turned to carrying containers on their decks. Golden Ocean Group is among the companies that said it is looking at the idea. While it could spur additional profits in an already windfall year for owners, it is not without risks as bulk carriers aren’t designed to carry the giant boxes.
“It tells a story about the special situation we are in,” in the container market, Ulrik Andersen, Golden Ocean’s chief executive, said earlier this month.
While for many shipping sectors Covid-19 has brought a boom, for oil tankers it has meant loss-making trades for much of 2021 and owners effectively subsidising the shipment of crude oil.
With OPEC+ still keeping a chunk of supply offline there are too many ships and too few cargoes, keeping earnings depressed. That has burnt one of the hottest trades in the sector at the start of the year – bullish oil tankers positions on the hope of a summer surge in oil demand.
Still, with on land oil inventories declining, analysts continue to anticipate a rebound. Rates could begin to move higher in October as stockpiles dwindle and demand for tankers grows, Pareto Securities analysts, including Eirik Haavaldsen, wrote in a note to clients.
But for now, the tanker market remains the only blot for an industry where freight capacity is ever tightening. The ClarkSea index, which tracks daily earnings across a diverse range of shipping sectors, has already posted its longest run of monthly gains on record.
Those bumper earnings are also being seen in more esoteric markets. Car carriers now cost the most to hire since 2008. Rates for general cargo ships with heavy equipment are also surging, adding to a boom that is being led by container and bulk shipping.
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
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Chef Nobu's advice for eating sushi
“One mistake people always make is adding extra wasabi. There is no need for this, because it should already be there between the rice and the fish.
“When eating nigiri, you must dip the fish – not the rice – in soy sauce, otherwise the rice will collapse. Also, don’t use too much soy sauce or it will make you thirsty. For sushi rolls, dip a little of the rice-covered roll lightly in soy sauce and eat in one bite.
“Chopsticks are acceptable, but really, I recommend using your fingers for sushi. Do use chopsticks for sashimi, though.
“The ginger should be eaten separately as a palette cleanser and used to clear the mouth when switching between different pieces of fish.”
The Details
Kabir Singh
Produced by: Cinestaan Studios, T-Series
Directed by: Sandeep Reddy Vanga
Starring: Shahid Kapoor, Kiara Advani, Suresh Oberoi, Soham Majumdar, Arjun Pahwa
Rating: 2.5/5
Killing of Qassem Suleimani
Going grey? A stylist's advice
If you’re going to go grey, a great style, well-cared for hair (in a sleek, classy style, like a bob), and a young spirit and attitude go a long way, says Maria Dowling, founder of the Maria Dowling Salon in Dubai.
It’s easier to go grey from a lighter colour, so you may want to do that first. And this is the time to try a shorter style, she advises. Then a stylist can introduce highlights, start lightening up the roots, and let it fade out. Once it’s entirely grey, a purple shampoo will prevent yellowing.
“Get professional help – there’s no other way to go around it,” she says. “And don’t just let it grow out because that looks really bad. Put effort into it: properly condition, straighten, get regular trims, make sure it’s glossy.”
Cinco in numbers
Dh3.7 million
The estimated cost of Victoria Swarovski’s gem-encrusted Michael Cinco wedding gown
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The number, in kilograms, that Swarovski’s wedding gown weighed.
1,000
The hours it took to create Cinco’s vermillion petal gown, as seen in his atelier [note, is the one he’s playing with in the corner of a room]
50
How many looks Cinco has created in a new collection to celebrate Ballet Philippines’ 50th birthday
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The hours needed to create the butterfly gown worn by Aishwarya Rai to the 2018 Cannes Film Festival.
1.1 million
The number of followers that Michael Cinco’s Instagram account has garnered.
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THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
Tearful appearance
Chancellor Rachel Reeves set markets on edge as she appeared visibly distraught in parliament on Wednesday.
Legislative setbacks for the government have blown a new hole in the budgetary calculations at a time when the deficit is stubbornly large and the economy is struggling to grow.
She appeared with Keir Starmer on Thursday and the pair embraced, but he had failed to give her his backing as she cried a day earlier.
A spokesman said her upset demeanour was due to a personal matter.
