The shipping industry is known for its volatile markets and treacherous waters, posing challenges to those who navigate it. Similarly, the container-ship industry faces volatile weather conditions, making it a perilous journey for those who sail the high seas. The global pandemic of 2022 led to a surge in container rates as people stayed home and increased their buying, resulting in shipping lines seeing returns on capital exceeding 40%. However, as demand decreased and new vessels ordered during the boom began to arrive, rates and returns started to tumble.
The situation worsened when attacks by Houthi rebels in the Red Sea disrupted shipping through the Suez Canal, sending rates back to record levels previously seen only during the pandemic. Despite these challenges, history suggests that the shipping industry is prone to value destruction. Between 2002 and 2019, shipping firms’ average return on capital was 4.7%, falling short of the average cost of capital, which is around 10%. Building new ships takes time, with the global fleet adding a record capacity of around 2.3 million 20-foot equivalent units in 2023, surpassing the previous annual record by 37%. Additionally, another 1 million units arrived in the first four months of 2024, raising concerns about overcapacity. In February, A.P Moller-Maersk, the world’s second-largest shipping line, warned of potential losses of up to $5 billion for the year.
Despite these challenges and concerns about overcapacity
