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Bloomberg

Massive Cargo Ships Are Outrun by Nimble Fleet in New Speed Race

(Bloomberg) — For years, container shipping was a rough business. Margins were minuscule, the risks were high and growth prospects bobbed with the unpredictable tides of global trade. That it’s now generating record profits is one of the great economic surprises of the pandemic.The transformation over the past year also debunks a premise expressed loudly by pundits and politicians in recent years that U.S.-China trade, the most vital route of international commerce, was heading inexorably down a path of steady decline. The world wants more from China Inc. today than ever, and — as illustrated by the containers piled high on a ship stuck in the Suez Canal this week — companies in the U.S. and Europe need it faster than before.Accelerated by more online shopping, the demand is so strong that customers of ocean freight are increasingly willing to pay up for it, too. At Matson Inc., a Honolulu-based company with a fleet of smaller, nimbler vessels that charge a premium over the rates to transport on much larger ships, the need for a quick Shanghai-to-Los Angeles service became so great that executives decided to add a second weekly run last year and make it a permanent offering.“I was getting calls at 2 in the morning from customers saying ‘Look, you’ve got to do something, you’ve got to help me,”’ Matthew Cox, Matson’s CEO, said in an interview.Matson’s main business is shuttling staple goods to Hawaii and Guam and it ranks outside the top 20 largest container lines. But its stock jumped almost 40% last year and the industry as a whole is healthier than ever, topping more than $200 billion in estimated revenue in 2020. It’s conceivable that the largest players including Denmark’s A.P. Moller-Maersk A/S and China’s Cosco Shipping Holdings Co. ended a tumultuous year with their most profitable quarter to date.Another $1.9 trillion in U.S. fiscal stimulus may keep the good times going in 2021. Maersk CEO Soren Skou said on Tuesday that “we have to expect that some of that money will be used to buy goods that need to be transported.”Still, running full steam has revealed how temperamental the backbone of the global trading system is when stretched: Crews are overworked, thousands of containers have tumbled overboard in high seas and the vessel blocking Suez threatens wider economic problems if it snarls traffic for more then a few days.Read More: Suez Canal Snarled With Giant Ship Stuck in Top Trade ArteryBeyond the setbacks, ocean freight companies have been propelled by a confluence of factors. First, governments from Australia to Belgium kept consumers flush with cash and their financial systems liquid. Then China’s factories and American consumers recovered quickly from last year’s initial shocks and emerged from three years of supply-and-demand turmoil — a U.S.-China trade war followed by the pandemic — still intertwined.“China remains the manufacturing floor of the world,” Cox said in early March. “There are problems that are real and need to be dealt with, but it doesn’t change the fact that China has built a very capable network that in the short run people will find very difficult to replace.”For six decades before Covid-19, U.S. household spending on goods declined proportionately as Americans spent more on services. That trend flipped in 2020, to the tune of a $523 billion increase in merchandise purchases, McKinsey & Co. calculates. “All the freighters and transport assets were more or less sucked up by the strong transpacific trade lane,” said Ludwig Hausmann, a partner in McKinsey’s Munich office. “China right now is unbeatable.”In Washington and in European capitals, politicians vilified supply chains that extended to state-managed economies like China or Vietnam.But talk to retailers and manufacturers dependent on Asia and it becomes clear the crisis reinforced those links,…