Supply Chain Matters calls reader attention to a rather insightful published Bloomberg opinion commentary, Shipping’s $500 Billion Profit Can Take on Amazon. (Paid subscription or metered view)
The essence of this commentary is that with global container shipping lines expected to generate $500 billion in profits this year, on top of the $190 billion of annual profits and upwards of $130 billion of free cash generated in 2021, their “once in a lifetime haul” is being splurged on stock dividends, repurchases, acquisitions and investments aimed at vertical integration of global wide transportation and logistics services. That according to the author, Chris Bryant, may end up in stoking even greater political backlash. Eight global shipping lines organized into three major capacity controlling alliances now reportedly control upwards of 80 percent of global wide capacity. Further indicated is that the industry’s ongoing acquisition efforts are: “a fancy way of saying controlling every stage of the supply chain.”
Readers who have be following our own Supply Chain Matters commentaries reflecting on the continued accelerating rates of supply chain driven inflation, have provided a similar viewpoint.
Shipping industry integration efforts directed at broader logistics services have not necessarily gone well in terms of overall integration. With so much added advanced technology being introduced to solve existing inter-modal transportation and logistics industry inefficiencies, the challenges of business process and cultural integration become ever more complex for a shipping industry that literally has fallen way behind in technology enablement.
Now, smaller logistics or industry specific services companies, along with major governments are becoming what the report terms as “antsy.”
What is more profound is Bryant’s observation that EU based shipping lines hardly pay any taxes on current windfall profits in that: “..rather ridiculously-their taxes are assessed according to the size of their ships, not how much they earn.” A table provided in this report indicates that the top three industry players pay an effective tax rate ranging from a low of 0.7 percent to a high of 3.7 percent.
This Editor is in concurrence that there are growing risks for ocean container carriers. As we have stated often on our platform, the industry has to be mindful of the implications of collective actions.
While carriers, brokers and logistics services suppliers can look to reap individual benefits and added monetary rewards, the notions of immunity to global wide anti-trust actions directed at carriers, or exemption to windfall tax immunity, are all subject to change.
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