The Lloyd’s List Podcast: Why the box sector is in for a bumpy ride

THE container sector is no stranger to irrational exuberance. The last time we had an overcapacity market from 2016 to 2019, we saw nine off the top 20 carriers disappear in the space of two and a half years – a period that saw the carriers losing money on nearly every box they were moving. And as one of guests on this week’s edition of the Lloyd’s List Podcast points out, that was scary. But the only thing scarier than shipping lines with no money is shipping lines with money. The box sector is going through something of a reset at the moment. Freight rates have fallen sharply as demand has slumped. A flood of new tonnage is joining the global fleet at a time when carriers are being encouraged to remove capacity from the market, putting further pressure on both rates and reliability. It’s no surprise then several of the lines are warning that earnings this year are set to fall sharply, but this feels to be more than just a cyclical downturn. There are very few certainties and some wildly different strategic approaches being set out to deal with what happens next. When the container set gathered for their annual conflab at TPM last week it was notable that the keynote speaker was not one of the big beasts of box boardrooms, but retired general and former CIA director David Petraeus, who issued a stark warning that the era of “benign globalisation” was over and that the expectation that shipping could see the same levels of steady growth it was used to was irrational in the context of a changing world. There was lots of talk about how tensions in the Asia-Pacific region threatens to overturn the “logic of globalisation”. Container shipping is looking increasingly nervously at the big macroeconomic and geopolitical uncertainties that will ultimately decide their fate. So, in the wake of TPM we are taking a quick top level look this week at how the container sector is faring against the backdrop of a post-pandemic slowdown and some longer-term questions about the future of globalisation. Speaking on the podcast this week • James Baker, Lloyd’s List Containers Editor • Tomer Raanan, Lloyd’s List US Correspondent • Alan Murphy, chief executive and founder of Sea-Intelligence