According to foreign media sources, the container shipping industry rebounded in the first quarter of 2024 after six consecutive quarters of declining profits, achieving a profit of $5.4 billion, which is an impressive turn.
This reversal was mainly attributed to the increase in rates for the Red Sea diversion and stronger-than-expected traffic volumes. According to John McCown, longer voyages due to the Red Sea diversion have resulted in an 8% reduction in global capacity. At the same time, the volume of transactions in the first quarter of 2024 increased by 9.2% compared to the same period last year.
McCown noted that the unexpected increase in trading volume had significantly boosted freight rates, but the Red Sea situation had proven to be a key factor behind the recent spike in prices.
From a revenue high of $63.1 billion during the pandemic-induced boom in the second quarter of 2022, the shipping industry is recovering after six quarters of decline. He described the decline as "faster and steeper than climbing to peak gains."
Net income by quarter. Chart courtesy of Blue Alpha Capital
McCown's report also highlighted the significant impact caused by the pandemic, which has "materially changed" the supply and demand dynamics that have impacted industry pricing. Prior to this, chronic overcapacity could be traced back to the 2008 financial crisis.
The market continued to favor container shipping companies in the second quarter, with spot container rates rising by more than 30% in recent weeks as the peak season approaches. Analysts also noted that contract renewal periods are difficult due to market uncertainty as the current tight capacity is balanced against a potential oversupply if the situation in the Red Sea eases.
Compared to the beginning of the year, shipping companies are now much more optimistic about 2024, raising their full-year expectations for 2024...
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