Yahoo Sports Shipping Companies Had a $150 Billion Year Amid Supply Chain Woes — How Their Profit Was Your Loss
One of the biggest stories of 2021 was the global supply chain crisis that created massive shipping delays, contributed to runaway inflation, and most likely left you wondering where some of your favorite products were. Less attention, however, was paid to the massive profits ocean shippers made over the past year.
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Ocean-freight carriers pulled in estimated profits of $150 billion in 2021, Bloomberg reported. That was up nine-fold from the previous year and ended a long run of much smaller gains. Historically high shipping rates played a major factor in last year’s windfall, and are expected to continue in 2022.
The spot rate for a 40-foot container to the United States from Asia topped $20,000 in 2021, including surcharges and premiums. Only a few years earlier, the same rate was less than $2,000. Even more recently, it was closer to $14,000. Thanks to a shortage of container capacity and congested ports around the world, current contracts between carriers and shippers are an estimated 200% higher than a year ago. That likely means higher rates will continue for the foreseeable future.
This has mainly impacted smaller importers and exporters that don’t have the scale to negotiate favorable shipping terms the way large customers like Walmart can. Meanwhile, large shipping companies are raking in the money.
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As Bloomberg noted, Denmark’s A.P. Moller-Maersk A/S — the world’s second-biggest container carrier — was on track to post 2021 profits that would either match or exceed the combined total from the previous nine years. Other large shippers have enjoyed similar results.
This might be great news for the shipping industry, but it’s not so great for everyone else. High transportation costs not only contribute to inflation — they also make it harder for economies to recover from the COVID-19 pandemic. And the problem might not be going away anytime soon.
“Those types of shocks tend to have lasting effects 12 to 18 months out,” Nicholas Sly, an economist with the Kansas City Fed, told Bloomberg.
Consumers have taken the brunt of it. As GOBankingRates previously reported, double-digit inflation has hit many sectors of the economy, including fuel, oil, utilities, and new and used vehicles.
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A sudden, prolonged or (best of all) permanent end to the pandemic would do wonders to bring shipping rates back to normal. That hasn’t happened so far because of variants like Delta and Omicron that keep creating problems.
“Pre-pandemic, the situation that we’ve had for the better part of 20 years is plenty of capacity, really low rates and plenty of service,” said John Butler, CEO of the World Shipping Council. “There’s nothing in the industry as a structural matter that has changed since then.”
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This article originally appeared on GOBankingRates.com: Shipping Companies Had a $150 Billion Year Amid Supply Chain Woes — How Their Profit Was Your Loss
