Why the Suez Canal blockage is a long-term win for container shipping companies

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The Suez Canal blockage is still causing operational chaos for carriers and financial pain for customers. Yet analysts expect container lines to turn disaster into triumph, as they did with COVID-19.

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Yet even as container shipping struggled to cope, the sector's leading players including Maersk Line, CMA CGM, and Hapag Lloyd have racked up record profits. John D. McCown, shipping veteran and author of the recent book 'Giants Of The Sea: Ships & Men Who Changed The World', estimates container shipping racked up a collective profit in the fourth quarter of 2020 of around $9.1 billion, compared to a breakeven result a year earlier.

Think of it like a traffic jam on a highway, said Randy Giveans, the senior vice president of equity research at Jefferies: The drivers ferrying passengers get paid even if they're sitting still. And those not on the highway can charge more for fares, since much of the driver supply is locked up. There will be other knock-on effects from Suez that could benefit container lines. For example, container shortages in Asia have been an expensive hindrance to US manufacturers for months. The Suez closure will exacerbate the issue, providing a pricing boost for box manufacturers and those companies – including container lines – that possess large fleets of boxes.

 

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