When does constant turmoil become business as usual? If the container shipping industry is the subject of discussion, the answer is, “You're looking at it.”

In recent years, container lines (and the shippers that depend on them) have contended with a global pandemic; ongoing wars in the Middle East and Ukraine; labor actions and threatened labor actions; labor shortages; piracy; tightening fuel and environmental regulations; volatile and rising costs (including the cost of capital); drought in the Panama Canal; and catastrophic maritime mishaps. These are just a few of the events and conditions driving rate volatility, wreaking havoc with sailing schedules, and testing the determination and financial stamina of carriers and shippers alike.

The fact is, container lines have had to deal with one thing after another as a matter of course. And as we shall see, they have evolved strategies and tactics that have enabled them to weather the down times inevitable in a highly cyclical industry—and even to profit from the shocks, reversals, and contingencies endemic to the business. When an industry operates in environment in which “it’s always something,” that “something” becomes the foundation of profitability management. 

The container shipping industry’s 2023 financial performance reflects the resilience and adaptability that operators have cultivated to survive. The business press, understandably, focused in 2023 on carriers’ dramatic post-pandemic collapse in revenues, which dropped 30% to an aggregate $254 billion from $362 billion a year earlier. Receiving less attention was an equally significant story: carriers remained profitable in 2023 and earned relatively high marks on most measures of financial health. And even as revenues plunged and margins tightened, carriers continued to invest in new, more environmentally sustainable vessels and propulsion systems, upgrades to port facilities, and acquisitions in adjacent industry subsectors. 

These carriers’ performance in highly unfavorable conditions demonstrates how they have evolved a range of strategies to weather the ups and downs of the business cycle and cope with unexpected and unpredictable adversities. (We’ll look more closely at those strategies later in this report.) And they have had plenty of adversity to cope with: The war in the Middle East, to cite one prominent example, has all but eliminated the Red Sea and the Suez Canal from the route map of the major container lines. Traffic has been rerouted around the Cape of Good Hope, in the process creating persistent equipment and space imbalances; degrading reliability; driving steep rate increases for cargoes originating in Asia; hampering the growth of the fastest-growing trade route between Asia and the U.S. East Coast; and stoking a disastrous rise in CO2 emissions. Rates will likely remain high until the reshuffling of assets is complete, and container shipping will skirt the Red Sea and Suez Canal until the Houthis run out of rockets, missiles, and drones—whenever that might be.

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