Despite a harsh year for most consumers who had to put up with high freight rates and supply chains disruptions, container shipping is poised for a historical windfall. In their recent data, Drewry, a maritime research consultancy firm, estimated that container shipping pre-tax profit for 2021 and 2022 would be as high as US$ 300 billion.
Partly, the strong demand for containers along the transpacific shipping route is the reason for the momentous profitability. In fact, Drewry called it “an extraordinary war chest to play with.”
This is a significant moment as shipping, in general, has historically been a low-margin industry. Since the 2007 financial crisis, Ocean freight rates remained low, negatively affecting sea freight revenues. The situation was so dire that Maersk, the world’s largest shipping company recorded a loss of US$ 165 million in the last quarter of 2015.
Around the same period, China approved the merger of its two shipping conglomerates, China Ocean Shipping Company (COSCO) and China Shipping Group Company (CSCL). For three consecutive years, these companies had accumulated massive losses that they were on the verge of being delisted from the Shanghai Stock Exchange.
Thus, it will be interesting to see how shipping companies will expedite their fortunes in this profit-making era. Of interest will be to see if they will be spending part of it in Africa?
Currently, order books are filling up as shipping lines splash money on new vessels. Last month, CMA CGM paid US$ 2.3 billion to buy a full stake in the third-largest terminal at the Port of Los Angeles. Maersk is also buying jetliners and expanding its airfreight and land freight business, as part of a wider strategy to offer door-door services similar to what is provided by the likes of DHL, UPS, and FedEx.
In 2017, A.P Møller-Maersk, the parent company of Maersk line, created A.P Møller Capital (APMC) with a target to raise large sums of money to develop key infrastructure projects. The fund later established a portfolio exclusively focused on Africa, dubbed the Africa Infrastructure Fund, which, by 2018 has raised over US$ 1 billion from international institutional investors. With lots of cash to spend now, Maersk can readily deploy capital to grow this fund.
Some of the initial projects under the portfolio include the expansion of a mineral and general cargo port in Gabon. In addition, it invested in building a new modern bulk port in San Pedro, Ivory Coast.
Recently, APMC announced acquiring a stake in Cabeolica, S.A- Cape Verde’s largest IPP (Independent Power Producer) and renewable energy producer, off the West African Coastline.
Meanwhile, COSCO shipping recently estimated that it is expecting to net US$ 4.73 billion in the third quarter.
This may bolster its ongoing negotiations with the Government of Sudan to revive the country’s national shipping company. In an interview on revamping the Sudan Shipping Line, Chairman Abdul- Azim Hasab Al-Rasol said, “our national shipping courier can help the country save a lot of hard cash currency if we give it exclusive rights to transport all exports and imports.”
The French Shipping conglomerate, CMA CGM has also had an enviable year. It posted an astounding profit of US$ 3.5 billion in the second quarter, 25 times higher than the same period last year. Its newly formed airline called CMA CGM Air cargo is a great beneficiary of the windfall. To show how significant the investment is, CMA CGM in September doubled down on a decision to buy two new Boeing 777 freighters. The price of each, approximately US$ 350 million is eight times the quarterly profit that CMA CGM would make before the pandemic.
Although speculative, CMA CGM can also use its fortunes to make good of its promise to invest in Kenya’s Lamu Port.
When the company’s Vice President for Africa, Ludovic Rozan toured Lamu Port in July; he said the port offered a good opportunity as a transshipment base.
“From the Port of Lamu, CMA CGM can be able to handle transshipments to Tanzania, Ethiopia, South Sudan, Somalia, Mombasa, and even Mozambique,” said Rozan
