The Business of the Seas: How Container Shipping Delivers Billions

Container shipping is a business with high rewards but also significant initial investments. Let’s break down the costs and profits of purchasing and running a large container ship on the profitable Asia to U.S. route.

Consider buying a massive container ship, like the one Hyundai Merchant Marine launched recently. This ship, with a capacity of 24,000 TEU (twenty-foot equivalent units), costs around 150 million dollars to build. However, with potential discounts, it might be available for about 140 million dollars.

With a depreciation period of 25 years, the annual depreciation cost of the ship comes to roughly 4.5 million dollars. Now, focusing on the West Coast route from Shanghai to Los Angeles, this ship has the potential to generate significant earnings.

On this route, the shipping rate is approximately 15,000 dollars per container. Although the ship can carry 24,000 containers, it can realistically carry around 20,000 containers per trip due to weight and utilization factors. This means the ship could generate a total of 300 million dollars in freight revenue per trip.

To carry the containers, purchasing 20,000 containers, rather than renting them, would cost an additional 80 million dollars, at 4,000 dollars per container. However, the earnings from the ship will quickly cover this expense.

The journey from Shanghai to Los Angeles takes around 13 days. During this time, the ship uses 220 tons of fuel per day. With fuel priced at 420 dollars per ton, the total fuel cost for the entire trip is approximately 1.1 million dollars. Additional expenses such as daily crew wages, port fees, and miscellaneous costs add up to about 350,000 dollars for the trip. Therefore, the total cost of one journey amounts to roughly 1.45 million dollars.

After accounting for these expenses, the gross profit from a single trip would be around 298 million dollars. This means that, after covering the costs of the ship, containers, fuel, labor, and other fees, there’s still a profit of 50 million dollars per trip.

With such profitable returns, setting a goal to earn 1 billion dollars doesn’t seem far-fetched. A few successful trips could easily help achieve that target, making container shipping an attractive business option with great potential for growth.