Bottlenecks and Equipment Shortages to Continue for Container Market

Dear all Valued Customers

The significant challenges currently plaguing the container market with bottlenecks and equipment shortages will last several more months, says one of the world’s biggest container lines, HMM.

This announcement comes just one day before Maersk is expected to address the situation in connection with its annual report.

It could be a while before the bottlenecks plaguing the container industry are solved, projects South Korean container line HMM.

An over-heated container market has for months caused large-scale bottlenecks. One result of the current market situation is the ongoing accumulation of container ships lining up outside major ports on the US West Coast. Meanwhile, soaring demand has led to a significant shortage in empty containers to transport the goods in.

Supply chain disruptions (…) are on course to remain unabated over the short term.

And HMM expects this situation to continue for quite a while, shows the carrier’s financial report, published Tuesday.

“The scarcity of containers and space on vessels will last through at least the first quarter of this year, with a likelihood that this situation continues until late spring,” writes HMM.

“Supply chain disruptions led mainly by a backlog of containers and terminal congestions at several main ports are on course to remain unabated over the short term.”

Coronavirus vaccine roll-outs and a change in consumer patterns could put a damper on the container market over time, says HMM.

At HMM’s alliance partner, Hapag-Lloyd, president of the America office, Uffe Ostergaard, recently talked about the red-hot container market. In the US, this has led to significant congestion in several large ports.

“For the longest time, I said that I would expect that the market would come down after Chinese New Year. But that does not look to be the case right now,” said Ostergaard in an interview in January.

Here he predicted that the strong container market is likely to continue into the first six months of the year.

HMM’s assessment comes in the wake of the company’s preliminary financial figures for the fourth quarter and full-year 2020, published Tuesday.

The figures clearly show that the South Korean container line has also reaped the benefits of the sky-high freight rates in the industry. During the fourth quarter, this led to a 48.8 percent increase in revenue as well as a USD 115.8 million net-profit. The latter is a clear improvement from last year’s USD 73.2 million deficit for the same period.

The fourth quarter, in particular, contributes to HMM being able to record black figures on the bottom line for 2020 as a whole. Here, the net-profit came to USD 105 million. In 2019, the company recorded a loss of nearly half a billion dollars.

The improvement has been secured even though the company saw a drop in its handled volumes by 9.2 percent to 3.89 million teu.

HMM is just the latest container line to publish figures that emphasize the overwhelming improvement seen by carriers in the industry. Hapag-Lloyd, ONE and OOCL have also all recently presented fiscal reports showing significant results progress.

Maersk presents its 2020 annual report Wednesday, Feb. 10.

In 2020, HMM significantly expanded its fleet, so much so that the company moved up the list of the world’s largest container carriers, assuming an eight place globally.

The fleet expansion was largely driven by the delivery of new megamaxes. And HMM also expects to take delivery of new vessels in the first half of 2021.

HMM will acquire eight 16,000 TEU newly-built container ships in the first half of 2021.

“HMM will acquire eight 16,000 TEU newly-built container ships in the first half of 2021. It will enable HMM to form an enhanced cost structure with lower fixed costs and secure greater operational efficiency,” writes HMM in its interim report.

HMM is part of The Alliance with Hapag-Lloyd, ONE and Yang Ming.