Container Ship Operators Are On A Tear As Freight Rates Skyrocket

For the past 20 years, the Port of Los Angeles has been the busiest seaport in the Western Hemisphere, responsible for exporting commodities such as soybeans and raw cotton, and importing everything from furniture to electronics. In 2020, container volume reached 9.2 million 20-foot equivalent units (TEUs), with total cargo handled valued at $259 billion.

Last month, the Port of L.A. saw an incredible 47% increase in container traffic compared to February 2020, representing the strongest February in its 114-year history. The port processed nearly 800,000 TEUs during the month, marking the seventh straight month of year-over-year growth.

port of los angeles saw record jump in shipping containers in february 2021

Click to enlarge.

Granted, last February was near the beginning of the lockdown in China, America’s biggest trading partner. Growth was therefore all but guaranteed a year later. But I believe something much larger is happening here. L.A.’s phenomenal surge isn’t a one-off event. We’re seeing a massive, synchronized explosion in global trade as economies reopen and fiscal stimulus measures ignite consumption.

Here are just a couple more examples of what I’m talking about: On the East Coast, the Port of New York and New Jersey saw not only double-digit container traffic growth in January compared to last year, but also its highest January on record for volume. In China, volume at major Chinese ports were up 14.5% in the first half of March versus the same period last year.

Freight Rates Expected to Remain Elevated, Boosting Shipping Stock Investment Case

This heightened trade activity is leading to a number of supply-demand imbalances that are ultimately pushing up freight rates, benefiting container ship operators.    

Congestion at ports is on the rise, leading to longer wait times. According to S&P Global Platts, turnaround times at the Port of Singapore have increased from around two days to as many as five or even seven days. Some retailers are reportedly paying more to have goods flown by air cargo to the U.S. to bypass long port delays. Demand for new shipping containers has outpaced new orders, leading to a global shortage.

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Disclaimer: The Frank Talk articles listed below contain historical material. The data provided was current at the time of publication. For current information regarding any of the funds ...

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Terrence Howard 2 weeks ago Member's comment

Thanks for the article. Great news.