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Profits sinking fast for major maritime container cargo companies

Demand down, capacity up in waning days of the industry’s pandemic economy bonanza as multibillion-dollar profits in 2022-23 are headed for multibillion-dollar losses in 2024
Historically high profit margins for COSCO and other major global shipping lines are headed for a steep decline, according to shipping industry analysts

The drop in containerized and overall cargo volumes handled by the Port of Vancouver (PoV) in 2022 is consistent with the slowdown in transpacific freight movement that began in 2022’s second half and has continued in 2023.

Overall PoV cargo volume dropped by three per cent to 141.4 million tonnes (MMT) compared with 146.5 MMT in 2021.

Container traffic through the port dropped to 3.55 million 20-foot-equivalent units (TEUs) from 2021’s 3.67 million.

That three per cent decrease reflects the overall slowdown in transpacific container traffic to major U.S. ports in general and West Coast ports in particular as documented by U.S.-based container shipping analyst John McCown.

According to McCown’s numbers compiled for March, container volume at the top 10 ports in the United States was down 32.2 per cent compared with the same month in 2022.

It was also the sixth straight month of double-digit declines of inbound container traffic. West Coast ports, he noted, fared even worse. Their average drop in inbound containers was 35.4 per cent in March compared with March 2022.

McCown also pointed out that March was the 22nd straight month where the percent change in volume at East/Gulf Coast ports had outperformed West Coast ports.

Diversion of transpacific container traffic away from West Coast North American ports began following the opening of the expanded Panama Canal in 2016 and accelerated significantly because of historic cargo congestion at Los Angeles-Long Beach and other major North American container hubs sparked by the COVID-19 pandemic.

Concerns over potential labour disruptions at West Coast ports have also increased that cargo migration as negotiations between unionized dockworkers in B.C. and West Coast U.S. ports and maritime employers have yet to yield new long-term contracts.

In its release of 2022 cargo data, the PoV stated that container volumes through the port’s terminals decreased late in the year “as a result of softening consumer demand coupled with increasingly overstocked inventories, which was in part due to a challenging planning landscape for retailers in the midst of global supply chain uncertainty.” 

PoV stats also show that full containers of Canadian exports through the port were down 20 per cent compared with 2021 and that the overall trade of full containers dropped by nine per cent. In addition, 58 per cent of all containers that left the port in 2022 were empty.

Despite the overall drop in cargo through the port, Robin Silvester, president and CEO of the Vancouver Fraser Port Authority, noted in a PoV press release that “global demand for Canadian goods remained strong in 2022 as geo-political instability spurred appetite for our grain, energy and fertilizer exports.”

Shipments of bulk grain, for example, were up 34 per cent in 2022’s second half compared with the same time in 2021.

In addition, fertilizer exports were up 13 per cent, sulphur increased 22 per cent and aviation and jet fuel jumped 88 per cent over 2021.

Applying a positive spin to the drop in container traffic through the port, Silvester said the decrease “is providing much-needed relief from the surge in volumes the port experienced throughout 2021 and much of 2022. However, the underlying story hasn’t changed, with the Port of Vancouver handling its second highest annual volume of containers on record in 2022.”

He later told BIV that trade through Vancouver “has held up more robustly than trade in other West Coast ports. We’re still seeing long-term forecasts of two to three per cent growth.”

Silvester added that lower container cargo numbers flowing through the port in 2022 can be attributed in part to “congestion in the supply chain and the fact that warehouses in the east have been full. So it’s been hard to move cargo through the system.”

He conceded that some of that congestion remains in the port but said the situation is beginning to return to normal.

[email protected]

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