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In 2020, shipping executives predicted the container-shipping capacity squeeze would last until Chinese New Year in February 2021. When that didn’t happen, they said mid-2021. The bar is now moving further out — to the fourth quarter or beyond.

After market close on Tuesday, Matson (NYSE: MATX) CEO Matt Cox said on a conference call with analysts, “We expect demand in the trans-Pacific trade lane to remain favorable, with elevated consumption trends to continue beyond the second quarter. We expect significant demand for our expedited CLX and CLX+ services to remain throughout the peak season into late October.”

Matson also expects “significant congestion, particularly in and around the ports of California, will most likely persist through the second quarter into the peak season.”

Cox entertained the possibility of the import boom going longer still, adding: “We are well prepared to meet customer needs if the congested environment we’re currently in continues beyond the peak season.”

Stronger for longer

The “stronger for longer” container-shipping thesis got an even bigger boost the day before, when industry giant Maersk pre-announced Q1 2021 earnings estimates, sharply upgraded its full-year EBITDA guidance by 36% and doubled its full-year free cash flow guidance to $7 billion.

“The exceptional market situation is now expected to continue well into the fourth quarter,” said Maersk, which hiked expectations for 2021 global demand growth to 5%-7% from 3%-5% previously, primarily due to “export volumes out of China to the U.S.”

Yet another market participant seeing much longer trans-Pacific strength: Nerijus Poskus, vice president of global ocean at freight forwarder Flexport.

In an interview with American Shipper on Monday, Poskus reported sold-out ships in May and said he expected high freight prices and difficult conditions until the end of this year.

‘Stockouts on essential goods’

Cox said that Matson itself has largely avoided congestion woes befalling other trans-Pacific carriers. He offered his perspective on what’s going on with his competitors and his shipper customers.

“In my nearly 40 years in the business, I have not seen an environment like this, with international trade lanes operating at capacity and widespread supply-chain congestion leading to pressure at U.S. ports, terminals, rail yards and warehouses,” he said. “Widespread supply chain congestion … has created a very challenging business environment.

“In many cases, we’ve seen other ocean carriers in the trans-Pacific trade not having the containers to fill their ships. We are also seeing other international ocean carriers continuing to ‘blank,’ or cancel sailings because they literally can’t get their vessels back on time for that next loading.”

He disclosed, “With retail inventories at relatively low levels to sales, our large retail customers are experiencing stockouts on essential goods. This is creating a just-in-time management environment to meet everyday consumer demand.”

Profits and freight rates jump

On Tuesday, Matson reported net income for Q1 2021 of $87.2 million, 23 times net income of $3.8 million in Q1 2020. “The company is making money hand over fist,” said Stifel analyst Ben Nolan.

Volume in its China-U.S. service surged 218.6% year-on-year due to more capacity in its CLX service, the launch of the CLX+ service in Q2 2020 and easy comps versus the same period last year, when volumes were hit by the Wuhan outbreak.

Cox also reported that Matson’s eastbound container volume in April is up 151% year-on-year.

Matson’s annual contracts with beneficial cargo owners generally run from May 1. “Those are largely done and Matson realized a significant increase [in rates] for this portion of its business,” as well as “relatively large increases” for quarterly and monthly contracts with non-vessel-operating common carriers, said Cox. “We expect to see a pretty healthy increase year over year going into the second quarter and beyond.”

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Asia-West Coast spot rates are currently more than triple rates at this time last year (Chart: FreightWaves SONAR. To learn more about FreightWaves SONAR, click here.)