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Global shipping giant Hapag-Lloyd reported a tenfold increase in net profits during this year’s first six months, year over year, to €2.7 billion, almost triple the company’s net profit of €977 million booked over the past ten years, the Financial Times reported.
Shipping costs have skyrocketed over the past 16 months as containers have been in short supply and ships have been queued, sometimes for weeks, at overwhelmed ports partially locked down by virus-related government mandates.
At the beginning of this month, the daily rate to load and send a 40-foot container on the most popular routes had soared to $18,346, compared to $1,550 in July 2020, and now exceeds $20,000, the FT said. (See “The Global Economy is All About Inflation Now,” Trends Journal, 3 August, 2021.)
In contrast, Hapag-Lloyd’s average cost for a 20-foot container was $1,612 during the first six months of this year, up 46 percent from a year before.
Hapag-Lloyd and rival Moller-Maersk, the world’s largest shipping line, have both reported recent windfall profits and have raised their outlook for the rest of this year.
Hapag has predicted its annual gross earnings this year will fall between €7.5 billion and €9.5 billion, again better than the previous ten years’ results combined.
The closure of one terminal at the Chinese port of Ningbo, the world’s third busiest ocean terminal, after one worker tested positive for the COVID virus portends even more weeks, and perhaps months, of choked supply chains, the FT noted.
“Looking at the market environment today, we do not believe that the situation will return to normal any time soon,” Hapag CEO Habben Jansen said in comments quoted by the FT.
“We expect the situation to ease in the first quarter of 2022 at the earliest,” he said.
TRENDPOST: A tenfold increase in net profits during a year of global crisis could be seen as price-gouging, otherwise known as “charging what the market will bear.”
The continued snarl in global supply chains, now dealing again with travel restrictions and closed port terminals, may well help keep inflation’s rate strong into 2022.
Again, what may bring down prices is a sudden equity market crash. However, inflation may still spike as governments flood markets and economies with cheap money which will in turn lower the value of currencies. Thus, the lower currencies fall, the more it costs to purchase products and services… which equals inflation.