Is Shipping and Travel a Good Financial Investment?

Taking a holiday using the advantages offered by the shipping industry means one or two things generally, either taking up employment on a vessel, tanker, bulk carrier or container vessel or taking on a slow, steady journey on board a cargo ship, allowing for a huge variety of voyages and destinations.

Such journeys are immersive, with comfortable, if basic amenities taking in those far-flung parts of the world that may make your experience a great conversation starter. Normally seafarers are not entitled to official holidays but getting to know the crew throughout the journey, dining and talking to the officers will offer a unique way to express your life history and opinions while embracing those of the many varied crew you will come across.

What vessel you will get aboard will be down to your resourcefulness, but it has to be said there are many out there. Many shipping companies have had significant investment over the years and there has been many developments in this market.

One of the main players in the shipping industry, A.P. Moller-Maersk’s, third quarter numbers in 2024 provide us with a good idea of how sensitive shipping companies can be when the freight rates go up and down. When concerned with the individual FEU (the cost of moving a 40 ft container), a $100 movement either way could bring about a $300M rise or fall on earnings prior to interest and tax (EBIT). The company have said that, in the third quarter of 2024, the average loaded freight rate was $3,236 per FEU. In the same quarter in 2023 the figure was $2,095. While fuel prices change and can affect their profits dramatically, the increase in the freight rate in this time period took their profits from an EBIT loss of $27million into a profit of $2.8 billion.

This factor of the price of an FEU can have both a good and bad effect within a short space of time.  The price of transporting a container in the third quarter of 2024 was $2,376 taking other costs into account. Now when freight rate revenues are above $3,000 per FEU, things are rosy. However, in the second half of 2023 rates went down dramatically and profits can disappear quickly making the picture less rosy. Quite clearly maritime careers are adversely affected when it comes to investing in new technologies, ships or new routes so a certain amount of estimation must be brought into being.

The Second- Hand Shipping Market

Purchase of second-hand vessels, particularly those of an age of 5 years and over, can be a useful way of saving money. The average price for one of these ships, at the start of the year, was 70% of the price of a new build. According to some commentators, for later in the same year, a suggestion of a swing towards more like 80%, would be accurate. This yet again shows the fluctuation in shipping goods and bulk around the world.

The Nature of the Market

The shipping industry exhibits a cyclical nature, and the market will turn eventually. It is doubtful that the sector can keep increasing capacity if demand doesn’t grow. Some have noted that 2024 was a record year for growth in both supply and demand. 2025 is predicted to bring these two components closer together. Bimco forecast that there will be growth for demand in cargo, in 2025, of between 3% and 4%. 2026 is expected to see a slight increase of 3.5% and 4.5%. Geographically, the areas of South and Central America, and South and West Asia are predicted to be areas for the most expansion in the import volumes within the sector. To keep up with the rising demand the fleet is expected to rise by 5.8% in 2025 and then 2.8% in 2026.

Deutsche Bank has a ‘sell’ rating on some of the leading company’s stock, worried that there is no evidence of a turn in the cycle and that significant overcapacity will lead to pressure on freight rates, the main driver of share price. This will undoubtedly be cyclical, but it is that word again, uncertainty, that is the main driver in the complex nature of the shipping industry.