- Shipping rates remain well above pre-pandemic levels
- Lines are ordering more ships to boost capacity
The massive hike in rates for shipping container vehicles has caused headaches for importers, but has helped shipbroker Clarkson (CKN) to earn a tidy profit.
The London-based company lifted its full-year profit guidance, saying that a strong December meant it now expected underlying profit before tax for 2021 to be not less than £69m, which is £4m higher than a forecast given just last month. Both its shipbroking and financing arms performed well, the company added.
Clarkson’s share price increased by 44 per cent last year and jumped by a further 5 per cent after its latest update.
Shipping rates have moderated from recent highs but still remain substantially higher than pre-pandemic levels. The global rate for shipping a 40-foot container currently stands at $9,293, down from over $11,000 in September, according to the Freightos Baltic Index. In March 2020, the rate was below $1,400.
The capacity squeeze on container vessels has also pushed up dry bulk freight rates as goods transfer to cargo ships – the Baltic Dry Index has gained 61 per cent over the past 12 months.
At the beginning of last year, order books for new ships were at their lowest for 30 years, according to Clarkson's own research. Although shipping lines rushed to order more vessels last year, placing $37.7bn of new orders in the first nine months, most of these are unlikely to come into service until next year at the earliest, meaning rates are likely to remain elevated.
Although Clarkson's shares now trade at almost 25 times earnings, we agree with broker Shore Capital's assertion that "further outperformance is likely", at least in the short term, and maintain our buy recommendation.
