Containers

After posting its best-ever quarterly results last week, Maersk has been elaborating on its continuing transformation of the business from a conglomerate that encompassed shipping and energy businesses to an integrated provider of container logistics.

The company’s Logistics and Services business, which it now sees as its growth engine for the coming years, is expected to bring in revenue of $8bn this year with an earnings margin of 10%.

Speaking at the carrier’s capital markets day this week, chief executive Søren Skou said the transformation of the company was turning it into a profitable high-growth company again that could ride out the cyclical nature of container shipping with reliable logistics revenues.

But the company, for many years the world’s largest container line by capacity, may soon lose that status, as 2M alliance partner Mediterranean Shipping Co continues to expand its fleet at a time when Maersk said it expected to grow its Ocean business below the market average.

Mr Skou is comfortable with that, however, and will focus capital expenditure on fleet renewal rather than growth, and on buying businesses that boost the logistics division.

That change at the top may come sooner rather than later.

Not only has MSC this week signed up to long-term charters for 11 dual-fuel LNG ships from Idan Ofer’s Eastern Pacific Shipping, it has also been linked to another order at Dalian Shipbuilding Industry Co for additional LNG-ready 16,000 teu units, marking a change in direction for the carrier, which has avoided LNG as a fuel until now.

The ships on order will not be ready until 2023, which will give tonnage providers some time yet to benefit from the sky-high charter rates they are achieving in the overheated container market.

Danaos said charter rates were the best it had seen for a decade, and charters were getting longer as carriers fought to secure tonnage to meet the increased freight demand.

Global Ship Lease also said that market momentum was positioning the sector for levels of profitability not seen in many years.

Tankers

Dinodia Photos / Alamy Stock Photo

While a cyberattack on a crucial US pipeline provided a short-term lift to transatlantic product tanker rates, the underlying fundamentals suggest any meaningful earnings recovery is still uncertain.

The International Energy Agency revised down its crude growth demand forecasts on worsening Covid-19 outbreaks in southeast Asia, underscoring how delicate any recovery will be until vaccines are rolled out globally.

The global oversupply of crude and refined products that depressed demand for tankers has gone. The Paris-based agency said crude stocks from OECD countries grew by 1.1m bpd since March while oil product inventories fell by double the normal rate.

However, any recovery in global oil demand remained fragile, according to the IEA’s monthly oil market report. Demand was estimated to rise by 5.4m bpd to 96.4m bpd this year, which was 270,000 bpd lower than the February forecast.

Reflecting parlous conditions was Danish operator Torm, the latest listed tanker company to post a first-quarter loss, with any recovery seen “in coming quarters”, according its chief executive.

Dry Bulk

THE dry bulk sector managed to shrug off a wobble spurred by fears of potential restrictions by China of Australian iron ore after the former ended diplomatic talks.

But the retreat seen in the capesize market and forward curve proved to be short-lived in a week that was marked by a labour day holiday in China, and the market was further pumped by high iron ore prices which reached a record $226 per tonne.

Analysts were quick to point out the continued strong demand for dry bulk commodities, not just in China, but in several countries around the world, which are seeing government stimulus. Steel production has recovered and global economic growth could be the highest in decades, bar any further coronavirus infections.

In fact, the market is so bullish right now that optimism is likely to seep into next year as low fleet growth continues to support freight rates. Stifel expects demand to exceed supply by about 2% in 2021 and 2022 with limited supply growth in 2023.