Top European shippers warn freight costs to stay high

[February 09, 2022]  By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) -Two top European shippers warned on Wednesday freight costs were likely to remain high well into this year, offering no relief to customers including the world's biggest retailers, though they said bottlenecks should ease later in the year.

Pandemic-related disruption and a surge in consumer demand drove up prices for shipping goods around the world last year, boosting profits for both container shipping group Maersk and freight forwarder DSV.

"Freight rates remain very high, volumes are strong and lots of shipping capacity is still tied up outside ports," Maersk Chief Executive Soren Skou told a press briefing after the Danish company confirmed record profits for 2021.

Efforts to speed up the movement of goods have yet to solve the bottlenecks, causing severe delays at major U.S. ports with knock-on effects around the world.

"As the pandemic eases and more people return to work, the ships will be handled quicker in ports, which will free up capacity," Skou said. "At some point during the year, we will see a more normal situation."

This view was echoed by DSV, the world's third-largest freight forwarder behind DHL Logistics and Swiss-based Kuehne & Nagel.

"A gradual reduction of the congestion could start in the second half of the year," said CEO Jens Bjorn Andersen.

He predicted that while shipping costs would have to come down, because low reliability due to congestion and delays did not match current high prices, they would not fall to the same level as before the pandemic.

"The high level of freight rates we have now is not sustainable for our customers. The quality and service we deliver as an industry is not good enough," he said.

Crew members look out from the MV Maersk Mc-Kinney Moller as it berths at a PSA International port terminal in Singapore, September 27, 2013. REUTERS/Edgar Su

Maersk said high shipping costs had prompted more customers to prefer longer-term contracts instead of relying on the securing container capacity in the spot market.

"In the extraordinary market situation last year, we've had to prioritize customers who sought a longer-term relation with us," Skou said. For those relying on the spot market, "the last year has not been fun."

Maersk, which handles about one in five containers shipped worldwide, expects operating profit at around $24 billion this year, similar to last year, but slightly below the $24.4 billion expected by analysts.

Its shares were trading 2.8% higher at 1108 GMT, but are down 11% since reaching an all-time high in mid-January.

Maersk hiked its dividend payout to shareholders to a total of 47 billion Danish crowns ($7.20 billion), or 2,500 crowns per share, versus 330 crowns per share a year earlier.

The company reiterated preliminary fourth-quarter results published on Jan. 14, when the company said a fall in ocean-going container volumes by 4% was more than offset by freight rates surging 80% compared with a year earlier.

($1 = 6.5248 Danish crowns)

(Reporting by Jacob Gronholt-Pedersen, additonal reporting by Stine JacobsenEditing by Barbara Lewis and Mark Potter)

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