While there is now strong evidence that container shipping’s record bull run has peaked, analysts argue that unlike the last time the sector went from peak to trough this time around there’s little chance of tough charter renegotiations. In the wake of 2008’s global financial crisis, many liners found themselves in a precarious financial position. A famous story from that period saw one of the best-known names in container shipping, now deceased, take a suite at the Atlantic Hotel in Hamburg, and summon in a host of German tonnage providers to rip up his charter contracts with them in front of their faces. Similar abrupt charter renegotiations were widespread at the time.

In 2022, liners have taken on a huge swathe of tonnage under onerous circumstances, at very high prices, and for longer periods than normal. The difference this time around as the Shanghai Containerized Freight Index and other indices show signs of slumping, Liners are in an extraordinary cash-rich position, something that should provide some reassurance to tonnage providers as the container market unwinds. Softening spot rates have fallen below long-term contracted rates this month, historically a firm pointer that the container sector is set to fall. Multiple surveys point towards a decrease in consumer demand on the back of soaring inflation. Major retailers have indicated lately inventory overstocking, something that is also pushing rates south. “We are indeed at a turning point in the market,” Peter Sand, chief analyst at freight rate benchmarking platform Xeneta, told Splash Extra. However, Sand said the key difference this time compared to previous turns in the cycle is simple: “Liners are loaded with cash. No one is at the brink of bankruptcy because the blanket has been removed from underneath them.”

In 2021 and 2022, container shipping operators are on track to record all time high combined profits more than $400bn, with operating margins in the most recent quarterly reports on average above 50%. “The kind of money operating owners have made in 2021 and will make in 2022 and 2023 have already paid for future charter hires,” Sand said. Simon Heaney, senior manager of container research at UK analyst Drewry, concurred, saying the current situation is vastly different to the period following the global financial crisis. “Lines will not be able to plead poverty after the bounty of the previous two years, with more to come in our view,” Heaney said, adding: “There is a growing risk for carriers to be stuck with expensive long-term fixtures after the freight rates boom has ended, but they now at least have a very plump cushion to fall back on.”

Hua Joo Tan, who heads up research outfit Linerlytica, said there was no charterer at risk of insolvency at the moment. Jan Tiedemann, a shipping analyst at Alphaliner, agreed with his peers, telling Splash Extra: “Most carriers are sitting on a big fat pile of cash. So even when the economy turns sour, they should be able to pay their bills for the next few years.” Drewry’s World Container Index composite index decreased by 3% last week to $7,285.89 per feu, and is 10% lower than the same week in 2021, but still remains more than $3,500 higher than the five-year average.