Uk News How shipping firms are making record profits, and making ordinary people pay the price United Kingdom news
PremierLeague-News.Com - The disruption to worldwide supply chains caused by Covid has forced firms to load up their older vessels to record levels to meet the demands of international trade
PremierLeague-News.Com - Breaking Sport Transfer News ! Shipping companies are capitalising on the increasing costs of freight by transforming old, rusting ships into gold mines, keeping prices high for consumers until a fleet of new vessels comes into service.The disruption to worldwide supply chains caused by Covid, coupled with a shortage of new container-carrying ships, has forced firms to load up their older vessels to record levels to meet the demands of international trade. The total capacity of the world’s container ship fleet grew during the pandemic, rising by 2.9 per cent in 2020 after increases of 4 per cent in 2019 and 5.6 per cent in 2018, according to shipping analytics firm Clarksons Research.But freight costs rose due to a surge in demand for consumer goods during pandemic lockdowns, congestion at ports due to changeable restrictions and a slowdown in new shipbuilding, partly curbed by builders anticipating new environmental requirements. Those pressures will are unlikely to fall soon, and neither are the associated costs. In turn, consumers will be dealing with higher prices on shelves for years to come. Companies are locking in their ageing vessels for long-term leases lasting three to four years, locking in those higher prices even as cost pressures start to relax. A Reuters review of 30 private transactions over the past three months found that ship owners are leasing vessels on long-term contracts at record rates, while the cost of booking container shipments rose by a record 30.1 per cent in May, according to Xeneta’s ocean freight index.Greek shipping firm Euroseas is one such company: it bought the Synergy Oakland, a mid-sized vessel that can carry more than 4,200 20-foot containers, for $10m (£8M) in 2019 when it was already a decade old.In the space of 100 days in 2021, when the world trade crisis was at its peak, it earned $21m, the highest daily freight rate in history for a ship of its size. In May, the Synergy Oakland embarked on a 4-year lease worth $61m, marking a six-fold return on its purchase price.“That was almost the perfect play in a rising market,” said Symeon Pariaros, chief administrative officer of the shipping firm. “We’ve not seen something like that in the history of the container market.”Sales data compiled by Reuters shows that cargo ships that are 10 or 15 years old, an age at which they were being scrapped before the pandemic, are worth up to 10 times what they were two years ago.The knock-on effects will be felt by consumers. The International Monetary Fund (IMF) estimates the container shipping boom in 2021 accounted for 1.5 percentage points of global price rises this year, about a quarter of the US inflation rate or a sixth of the UK’s. While the effect of higher food and oil prices has been observed in higher consumer prices within two months, it can take up to a year to feel the full effects of container shipping costs, warned Yan Carriere-Swallow, senior economist at the IMF’s Asia and Pacific Department.“The impact of shipping costs on inflation is large and widespread, affecting countries around the world,” he added.
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. The largest, Mediterranean Shipping Company, is privately listed and so does not publish its figures, but Danish firm Mearsk is close behind with a 17 per cent market share. It posted record earnings in the first three months of 2022, as revenues leapt up 55 per cent to reach $19.3bn, taking its forecast for the year’s earnings up to $30bn. More from BusinessDonald Trump's trade war took more than the angel's share from Scotland's whisky industry20 June, 2022It’s party time in Cannes, but with a serious aim to change the world one ad campaign at a time19 June, 2022In post-Brexit age of rampant nationalism how one media outlet plans to offer pan-European view19 June, 2022Not far behind is French rival CMA CGM group, whose 2021 shipping venues were up 78 per cent at $56bn. COSCO Shipping, Ocean Network Express and Hapa-Lloyd also posted record increases in revenue for 2021.By the end of 2022 the shipping industry is projected to have earned $500bn in operating profit from the preceding two years, when supply chain issues delayed the shipment of goods around the world, according to research firm and consultancy Drewry. Just eight companies control 80 per cent of the world’s container shipping capacity, and they are grouped into three major alliances.There will be more pressure on shipping firms to adjust their business models, however. For one, new ships ordered several years ago are on their way to market: In 2021, a record-breaking 555 container vessels worth $42.5bn were ordered and 208 vessels worth $18.4bn have been booked so far in 2022, according to the World Shipping Council. Many of these are far larger and more efficient than their older money-earners.Environmental concerns will weigh heavily on companies too. Shipping emits about 2.9 per cent of global carbon dioxide emissions, just over a billion tons of the gas each year, prompting a number of fresh restrictions on the sector. Starting in 2023, all large ships will be given an A to E rating of their carbon intensity.The United Nations’ International Maritime Organisation is reportedly considering more stringent measures to curb emissions in the coming years, while the EU’s Transport committee is voting on new laws that aim to increase the uptake of alternative fuels in July.Companies are aware they will need to research alternatives. CMA CGM has invested billions in 10 new vessels powered by liquid natural gas and 6 more that run on methanol, alongside a trial of using used cooking oil to create biofuel in Singapore.Until then, shipping firms will continue to make money from their longest-serving vessels – if only so they can fund the change that will be necessary for their long-term survival.
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