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Financial Firms Profit from Bottlenecks

Global supply chain delays are causing hardship and annoyance for consumers and retailers, but they’re turning a profit for the financial companies that invested in shipping containers prior to the pandemic, according to The Wall Street Journal (subscription).

What’s going on: “After nearly a decade of distress, windfalls suddenly abound in the notoriously boom-and-bust container-ship sector.”

  • “Charter rates have soared, thanks in part to a global economic rebound that is translating into COVID-19-related labor shortages and port logjams. Cargo ships are in demand, following a years-long decline in the number of container ships ordered and continued consumer spending on goods rather than services.”
  • To cash in, lenders and hedge funds are chartering out container ships “at high rates and taking gains on their equity stakes in container-shipping companies whose stock prices have soared.”

Lenders benefit, too: Increased ship values and shipping-company financials have sent the container-shipping portfolio of one maritime-lending platform, Blue Ocean, soaring.

A caveat: “To be sure, some analysts say shipping stocks could lose their luster in coming years as the industry looks to replace the use of heavy oil with more-expensive non-carbon fuel. The shipping industry has committed to halving CO2 emissions by 2050, but it is under rising pressure after the recent United Nations climate summit to commit to a net zero target over the same period.”

  • Uncertainty about coming emissions standards has slowed new-ship orders, according to Michael Parker, Citigroup Inc. chairman for shipping and logistics.

The NAM’s view: “These port backups and supply chain delays aren’t some distant, downstream issue—NAM members are facing historically high shipping costs and unheard-of delivery delays on an hourly and daily basis,” NAM Director of Infrastructure, Innovation and Human Resources Policy Ben Siegrist said recently

  • “We will continue to engage with policymakers to identify short-term solutions and establish long-term measures that allow for economic growth and a functional, inclusive and efficient supply chain.”
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