Ladies and gentlemen, thank you for standing by. I'm Natalie, your course call operator. Welcome and thank you for joining the ZIM Integrated Shipping Services Ltd full year and fourth quarter 2021 earnings call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Elana Holzman, Head of Investor Relations. Please go ahead.
Thank you and welcome to ZIM's fourth full year and fourth quarter 2021 financial results conference call. Joining me on the call today are Eli Glickman, ZIM's President and CEO, and Xavier Destriau, ZIM's CFO. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements regarding expectations, predictions, projections of future events or results. We believe that our expectations and assumptions are reasonable. We wish to caution you that such statements reflect only the company's current expectations and that actual events or results may differ, including materially. You are kindly referred to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2021 annual report filed on Form 20-F to date, March 9, 2022. We undertake no obligation to update these forward-looking statements.
At this time, I would like to turn the call over to ZIM's CEO, Eli Glickman. Eli.
Thank you, Elana, and welcome to today's call. Before we turn to our call, I would like to take a moment and say that over the past couple of weeks, we have witnessed with great concern and sadness the human tragedy unfolding in Ukraine and the suffering of the people there. Our hearts go out to the men, women, and children affected by the violence. The safety of our employees and their families has been and continues to be our highest priority. Since the outbreak of the war, we have made every effort to assist them to stay safe. We are also in touch with customers in Ukraine and support them in any way we can. Our duty to preserve human life exceeds all other considerations.
As part of our effort, ZIM has donated to help build and operate a field hospital to care for Ukraine war victims. Now back to the business. 2021 was an extraordinary year for ZIM. We executed at the highest level and achieved many important milestones that are listed on this slide. These actions and decisions we took in 2021 make me very optimistic about our future. We have demonstrated that we are a decisive and fast-growing company with a leadership team and corporate culture to take full advantage of both near and long-term favorable fundamentals for container shipping. We believe that the container liner industry has fundamentally changed in recent years, and given ZIM's improved competitive edge, we see a bright future for ZIM in 2022 and beyond. I know that today ZIM is in a stronger position than ever.
The slide number five highlights. We highlight a number of key operational accomplishments that contributed to our 2021 record results. It is important to me to thank our employees worldwide for their hard work and dedication during the year of unique and unprecedented challenges. Their efforts directly contributed to ZIM's momentous results. We recognize that 2021 was also difficult for customers, and we continue to look for ways to provide best-in-class service. Most notably, we used our substantial cash generation in 2021 to make significant investments in equipment to facilitate the movement of cargo for our customers. We also significantly expanded our operated fleet capacity and launched many new services. From June 2020 and throughout 2021, we launched 17 new lines, including new express lines to meet growing e-commerce trends and provide vital shipping alternatives to airplanes.
As a result, ZIM's carried volume grew 23% in 2021 compared to 2020, while global volume grew only by approximately 7%. In 2021, we also took important steps to secure access to high quality and cost-effective tonnage by entering into chartering agreement for 36 new build vessels or 318,000 TEUs. Most of this capacity is LNG powered. This access to new tonnage will enable ZIM to meet growing demand to deploy more carbon efficient tonnage to assist our customers in meeting their own ESG targets. In fact, given this significant new build capacity, ZIM will be more carbon and cost efficient when operating these vessels starting in 2023 than it is today, improving our competitive position. Turning to slide six. We highlight our exceptional financial performance.
During the first quarter, we delivered yet another record quarter of revenues, record adjusted EBITDA, and record net profit, enabling ZIM to achieve historic full year results. For the year, we generated $10.7 billion in revenue, $6.6 billion in adjusted EBITDA, and $4.64 billion in net profit. We also grew shareholders equity to $4.6 billion. Consistent with our focus on profitability, we achieved record margins as well. Our full year 2021 margin was 61% for adjusted EBITDA and 54% for the adjusted EBIT. We continue to outperform the liner industry average. Moving to slide seven. This exceptional performance has positioned ZIM to return substantial capital to shareholders. Our dividend policy states that we will distribute between 30% and 50% of our annual net income in dividends, including interim dividends.
Today, we are delivering on the high end of these expectations. Based on our strong performance and outlook going forward, our board declared a dividend of $17 per share. We are also excited about the future. We are providing full year 2022 guidance, reflecting our strong performance in 2022 to date and favorable market outlook, which Xavier Destriau our CFO will discuss in greater detail. Specifically, our guidance for 2022 is that we expect to generate adjusted EBITDA between $7 billion-$7.5 billion and adjusted EBIT between $5.6 billion, excuse me, to $6 billion in 2022. Based on the midpoint of today's guidance versus our 2021 results, our 2022 forecast represents a 10% increase in our EBITDA. While EBIT is in line with 2021 results.
Slide eight outlines key achievements and activities across our four strategic pillars. ZIM's differentiated position and success rely on our operational and commercial agility and can-do approach. We have previously discussed, we view vessels as a means to achieve profitable growth. Since mid-2020, we have taken advantage of attractive opportunities to add necessary capacity to meet strong market demand and best position ZIM to continue delivering secure profitability. Most recently, we announced a charter agreement for five secondhand vessels and eight new builds to further strengthen our operating fleet and advance our proven strategy of chartering in cost-effective, highly versatile vessels to meet significant and sustained demand in our global network.
Since the beginning of 2021 to date, we have increased our operating capacity by approximately 20%, and we currently operate 125 vessels, up from 87 vessels as of the end of 2020. We adapted our fleet management strategy to the change in the charter market, and while the average duration of new charter is in fact longer, we successfully maintain upper flexibility to allow us to adjust our fleet size to market conditions. The capacity we added in 2021 has enabled us to further advance our global niche strategy to meet growing market demand. I mentioned our 17 new lines earlier. Following the pandemic lows in the first half of 2020, we identified the recovering demand early and capitalized on the turnaround in the market dynamics.
Most notably, we identified the opportunity to promote an alternative mode of transport for e-commerce customers and launched ZEX, our first premium express service from Asia to Los Angeles. We have since expanded our network of express services and now offer them to other destinations, including to Australia and New Zealand, and now we have the new line to the U.S. East Coast, to Baltimore and Boston. It is also important to note that we see strong customer retention in this new customer segment for seaborne transportation, and many of them are engaged in long-term contracts. Another example of our ability to identify and grow profitable commercial opportunities is our car carrier services. This is consistent with our focus on identifying attractive markets where we can develop competitive advantages.
At the beginning of the year, our fleet included two car carriers, and this number grew to eight car carriers as we identified opportunities to drive further profitability. A few weeks ago, we also announced the extension of operational collaboration with the 2M Alliance on the NGL to the U.S. East Coast and the U.S. Gulf Coast trades. The collaboration will now operate on the basis of a slot exchange and vessel sharing, making ZIM an equal partner on these joint services. Operationally, our standard of excellence continues to serve us well. A key component of this is advancing ESG targets, particularly sustainability objectives. We are seizing the opportunity to be a shipping sector leader in implementing policies and initiatives that help mitigate the impact of our operations on the planet.
Of the 36 new builds to be added to our fleet, 28 are LNG dual fuel container vessels. This represents 276 TEU of new tonnage. When we take delivery of these vessels, approximately 40% of our operating capacity could be LNG fueled, positioning us at the forefront of carbon intensity reduction among global liners and supporting our customers in their ESG efforts to reduce their carbon footprint. While the need to decarbonize can be perceived as a threat in our industry, for ZIM, it is an opportunity. Given our strategy to primarily operate charter capacity, we do not have a legacy fleet to replace and can easily and quickly transition to greener tonnage. In terms of free equipment, we grew our container capacity by approximately 33% since January 2021 to approximately 1 million TEUs today.
This is why investing in containers has allowed us to better support our customers during these times of growing congestions. We also renewed our reefers and today operate a best-in-class reefer fleet. These new reefers utilize the most advanced technologies and again, offer customers a more environmentally friendly solution. Finally, we continue to position ZIM as a leading digital shipping company focused on disruption and innovation. Throughout 2021, we advanced multiple initiatives such as Wave BL bill of lading, ZIMMA, and Ship4wd, which introduced disruptive technologies and could be significant future growth engines for ZIM. Internally, we continue to employ data science and artificial intelligence tools. For example, we launched in 2021 a partnership with Data Science Group, DSG, to develop advanced models to forecast demand, plan shipping routes, automate logistical processes and more as we continue to focus on profit optimization.
I will now turn the call over to our CFO, Xavier Destriau, for his comments on our financial results and market developments. Please.
Thank you, Eli, and I also would like to welcome everyone, and thank you for joining us today. On slide nine, we highlight several KPIs demonstrating our extraordinary financial performance. These were once again driven by continued elevated rates in the spot market, as well as higher Trans-Pacific annual contract rates. ZIM has continued to prioritize vessel de-inventory and other stated initiatives to capitalize on the e-commerce boom, which are key differentiators that have allowed us to earn even higher rates. Specifically, our average rate per TEU of $3,630 in the fourth quarter is 179% higher compared to the fourth quarter of 2020, and it is 12% higher than our average freight rate in the first quarter of this year.
For the full year of 2021, our average freight rate per TEU stood at $2,786, more than double compared to 2020. Our free cash flow in the fourth quarter totaled $1.7 billion compared to $391 million in the comparable quarter of 2020. That is an increase of more than 225%. For the full year, free cash flow was at $4.9 billion compared to $835 million in 2020. Turning to our balance sheet in 2021, total debt increased by $1.5 billion. That is mainly driven by the increased number of vessel fixtures that we concluded during the period, as well as higher daily rates and for longer average duration.
Over the same period, cash position grew by more than $3.2 billion. Therefore, driving net debt down to a point that the company closed 2021 in a positive net cash situation. Despite longer term charters becoming more common, the average remaining duration of our current chartered capacity today is 26.1 months, up from the 24.8 months that we disclosed in November, and bridging our current operating capacity to the scheduled delivery of our newbuild vessels. Also, our existing vessels are scheduled for renewal now in the remainder of 2022, and we have double that amount in 2023, reflecting approximately 33% of our total operating capacity.
This, as Eli previously mentioned, allows us to remain agile and adapt our fleet size to changing demand fundamentals. On slide 10, you can see that we have delivered 12 consecutive quarters of consistent improvements in earnings. At the same time, our net leverage has trended downwards from the 5.3 in the first quarter of 2019 to zero. Importantly, we continue to be positioned in the sub-tier of our industry, which we are reflecting the strength of our balance sheet. The success of our differentiated approach is clear as we generated strong improvements across all financial metrics versus the prior year. Revenue for 2021 was $10.7 billion compared to $4 billion in 2020, driven primarily by improved freight rates as well as an increase in carried volume.
Consistent with our focus on profitable growth, net income for 2021 was at $4.6 billion compared to $24 million for 2020. Adjusted EBITDA of $6.6 billion for 2021 compared to $1 billion for 2020, representing growth of nearly 540%. Our 2021 adjusted EBITDA and EBIT margin also improved this year to 61% and 54% respectively, versus 26% and 18% in 2020. Turning to Q4 results. Total revenues in the fourth quarter increased to $3.5 billion compared to $1.4 billion in the fourth quarter of 2020. An increase of more than 150% due to improved freight rates and increase in carried volume.
Again, consistent with our primary objective to grow profitably, fourth quarter net profit was $1.7 billion, compared to $356 million in the fourth quarter of last year. Adjusted EBITDA for the fourth quarter also significantly increased to $2.4 billion, compared to $531 million in Q4 2020. Adjusted EBIT increased to $2.1 billion in the fourth quarter, compared to $439 million in the comparable quarter of last year. The Q4 2021 Adjusted EBITDA and Adjusted EBIT margin of 68% and 61% respectively improved year-over-year and sequentially and continue to position ZIM among the industry-leading performers. Our Q4 results include a tax expense totaling $374 million for the quarter, and that is $1 billion for the full year of 2021.
As we previously indicated, in 2022, we will be incurring and subject to 33% of corporate income tax rate in Israel. On the next slide, we highlight the increase in our carried volume by 23% in 2021 to 3.5 million TEUs compared to 2.8 million TEUs in 2020. This is significantly higher than the market growth rate of approximately 6.6%. Volume growth of 65% in intra-Asia and 22% in Transpacific were for ZIM, for ZIM the primary contributors. This growth was a direct result of our focus on expanding our presence and entering new trades. Our sales network is also the basis for our positive forward output. Though in 2022, we expect volume to grow in line with the market.
In the fourth quarter of 2021, ZIM carried volume increased by 7% to 858,000 TEU compared to carried volume of 799,000 TEU in the fourth quarter of last year. While at the same time, global market volume declined in the fourth quarter year-over-year by 1.2%. Sequentially, our fourth quarter 2021 carry volume was slightly down due to supply chain bottlenecks and consistent with conditions experienced across our industry. I mentioned our investments in equipment. In 2021, we purchased $898 million worth of equipment, adding approximately 306,000 TEU to our owned container fleet. Containers at a cost of $819 million have already been delivered to us during 2021.
Moving to slide 14, regarding our cash flow, we ended Q4 2021 with a total cash position of $3.8 billion, which includes cash and cash equivalents and investments in bank deposits and other investment instruments. During the fourth quarter, our adjusted EBITDA of $2.4 billion converted into a $2 billion cash flow from operations. Other cash flow items in the fourth quarter included $344 million of net capital expenditure, $308 million of debt service, and $299 million of dividend that we distributed in December last. For the full year, our adjusted EBITDA of $6.6 billion converted into a $6 billion cash flow from operations.
CapEx net for the year was $1.1 billion, debt service totaled $1.3 billion, and dividend distributions totaled $536 million. Moving to slide 15, I will discuss market fundamentals and our positive view moving forward. While many, including us at ZIM, initially expected a more normalized market towards the second half of 2021, these projections were pushed out as port congestion worsened and demand remained robust. Today, with the underlying market conditions which caused freight rates to increase and remain elevated still very much present, timing sentiment is now turning to the second half of 2022 at the earliest.
Moreover, we believe that even with the planned deliveries of 2023 and 2024, the need for additional tonnage and the impact of IMO regulations expected to come into effect in 2023, fundamentals remain favorable in both the near and the longer term, and the threat of overcapacity is minimal. The ocean timing indicators demonstrate the depth of port congestion as we've seen here on slide 17. The end-to-end transport time from the exporter's location to the port of destination of the factory grew from 45 days pre-pandemic to more than 110 days. As supply chains grow longer, there is a high demand for more vessels and containers to absorb this elongation. Inventories on the move are growing larger as well. These measures show no signs that the supply chain crisis has passed.
Turning to the graph on the right, lower port productivity is estimated to have reduced the effective capacity of the global fleet by as much as 11% and 17% for 2020 and 2021 respectively. Drewry suggests it could have a 12% impact for 2022. The next slide, the graph illustrates that the charter hire trend is picking up again, driving higher charter cost as well as longer charter duration. Turning to slide 19, higher fixed costs were also incurred by the liners as they source tonnage in the second-hand market to meet demand. 2021 saw extraordinary sale and purchase activity in terms of volume, but more important in terms of price. We believe that higher fixed cost structure demonstrate the liners increased confidence in market strength sustaining.
Looking at the chart on the right, the demand for container shipping continues to be robust and is being supported by the largest ever restocking cycle in the U.S. While sales to inventory ratio is slightly up, the data continues to suggest the pressure on retail-based inventory is partially spilling over to wholesalers as well. Inventory replenishment for wholesalers continues to fail to keep pace with sales, leading to inventory to sales ratio being well below average. We expect retailers and wholesalers to target higher inventory to sales ratio, which in turn is projected to sustain strong demand for container shipping. Turning to our full year outlook.
Based on our strong performance to date and favorable market outlook, we project in 2022 adjusted EBITDA within a range of $7.1 billion-$7.5 billion and adjusted EBIT within a range from $5.6 billion-$6 billion. In providing this guidance for 2022, we are assuming that the average freight rate in 2022 will be higher than the 2021 average, and that rates will start to gradually decline starting in the second half of 2022. Our contract rates for the Transpacific trade will most probably cover approximately 60% of our volume, and will be significantly higher than 2021 contract level. In 2022, we expect to grow our current volume in line with global market growth.
Average charter price in 2022 will be higher than 2021. As for charter rates, we expect them to remain stable in 2022. Yet I will remind you that our exposure to the charter market is now limited in 2022. As already indicated, we have only 15 vessels up for renewal before the end of the year. The approximately $700 million higher depreciation cost reflected in our 2022 guidance, which is reflected in the difference between EBIT and EBITDA, are mainly the result of, first, a volume increase as we will be operating more vessels in 2022 compared to 2021. Second, an inflation impact as renewal rates for our charter agreements have been consistently up on the year since mid-2020.
Third, the cost classification impact as we increase the percentage of long-term charters. That is charter duration of more than a year, and therefore shifting vessel costs from operating down to right of use asset depreciation. With respect to the impact of the war in Ukraine, at this time, we don't believe that suspending our services to Odessa and Russia will have a material impact on our 2022 financial results. We will indeed deploy or redeploy these vessels elsewhere, given the ton capacity. The situation is obviously fairly volatile and could change dramatically. Regarding our dividend, as discussed, our board declared a dividend of $17 per share today.
Together with the third quarter interim dividend of $2.5 per share, our annual 2021 dividend will total $19.5 per share, representing 60% of 2021 net income. Taking into consideration the special dividend of $2 per share that we paid in September 2021, we will return $21.5 per share to shareholders in dividends in our first year as a public company. An exceptional achievement by any standard. The total dividend distribution since our IPO of $2.6 billion represents approximately 30% of our current market cap and is 50% higher than our IPO market cap. We will now open the call to questions. Thank you very much.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Randy Giveans from Jefferies. Please go ahead.
Howdy, Eli, Xavier, and Elana. How's it going?
Good morning, Randy.
Thank you very much.
Oh, yeah. Good morning, indeed. Congrats, obviously, on the epic quarter, the year, massive dividend. I have a few questions, lot to cover, but I'll try to keep it brief. For your 2022 EBITDA guidance range, obviously very strong, also fairly tight, right? I guess what assumptions for maybe total volumes and average rate are you using to get to the midpoint of that guidance? In terms of revenue visibility to keep that tight range, any updates on your upcoming contracts in terms of amount of volumes or average rates, durations?
Yeah. Starting with the first part of your question, when it comes to our volume assumptions in 2022, after having grown in 2021 by more than 33%, we are becoming a bit more conservative when it comes to 2022 growth volume assumptions, and we are factoring in a below 60%-70% volume growth in 2022, which should be slightly above the average market growth, thanks to the full year effect of the lines that we have opened in 2021.
From a rate perspective, as we've mentioned, I think in one of the slides, our operating rate assumption for 2022, if we were to compare it to the average rates that we delivered in 2021, is going to be higher. That is because we are entering now in the first quarter of 2022 after having a growth, a very strong quarter in the fourth quarter of 2021. We see the resilience in the freight rates still are very much there.
The SCFI continues to be extremely strong, therefore, sustaining strong profit as we enter into 2022. When it comes to the visibility of the second part of the year, this is where I think we get the also added visibility of what we expect to see in terms of the contract cargo that we secure with our contracted customers, especially relevant on the Transpacific trade. 50% of our volume, and this is still not yet finalized, but we have better visibility today. We expect to close on average the contract cargo at a premium rate compared to what we secured, last season, which will also support the overall or the average freight rate towards the second half of 2022.
Okay. Can you quantify that a little bit? You know, better than, is that 5% or 80%, right, in terms of the average rates? Then for the durations, is the majority going to be 12 months?
Starting with the second part of your question, when we talk about the duration. Yes, the vast majority of our contracts are likely to be covering a 12-month period, as it has been the norm in the past. That doesn't mean that we will not have some contracts that may extend broader beyond 12 months, but some customers are asking us to consider. By and large, the vast majority should be for 12 months. When it comes to where we will be landing in terms of the average freight rates that will prevail for the contracted volume, we can say that we expect it to be significantly higher than it was in 2021. It's still a little bit too early for us to be able to quantify to what extent that may be.
Sure. That's fine. We can wait a few months for that. All right, second question, last one for me. Just around capital return, right? How did you and the board determine that $17 dividend, clearly above my expectations and probably anyone's? Why did you decide on the 50% of net income, all for dividends, maybe not balance that with share repurchases? You know, kind of talk through that process.
Yes. You know, what is very important for us is that we deliver on the promises we made to the market when we went public more than a year ago. We always said that it was high on the agenda of the management and the board to return capital to shareholders. As you may remember, we have refined and updated our dividend guidance, dividend policy over the first quarter of 2021. We ended up saying back in Q4 last year that the intention would be to pay between 30%-50%, to return between 30%-50% of net income back to shareholders. We are closing 2021 very strongly. The numbers do speak for themselves.
When we also look ahead into 2022, we are cautiously optimistic that 2022, at least the beginning of the year, starts quite strongly. We think that all the conditions are actually met to deliver on our promises towards the 50% range, as opposed to towards the lower edge of 30%. That's the rationale behind. We're also looking obviously at how do we best allocate our capital. We want to make sure we continue to invest in enhancing our commercial prospects, that we secure the equipment, the vessels that we need, that we are also continuing to invest in our digital transformation.
You know, the financial results of 2021 again, coupled with the outlook of 2022, really justify for us to return on the high end of the range. Now you also touched upon share buyback. Why not considering a share buyback? We always did mention as well that there are other ways to return capital to shareholders, not only dividends. Share buyback could be an option. For now, what we wanted to promote is, again, set a track record to our shareholders by delivering on our dividend commitment, not only in terms of absolute number, but also in terms of frequency of payment as they will be paid quarterly. Again, trying to set a track record here, which really should unlock shareholder value.
Got it. Hey, thanks for that thorough answer. You know, share buybacks would have been the cherry on top, but, otherwise, excellent results. Thanks again.
Thank you very much. You say that you are consistent, and it's okay. We're looking forward, but we think that this is the best way to deliver and to show our results, let's say, with our shareholders and looking around, see where the stock, shareholders, the stock rates today, you know, until the last few days. We think this is going to be the best way to deliver in return to our shareholders.
Yes, that's fair. Thank you.
Mm-hmm.
The next question is from Muneeba Kayani from Bank of America. Please go ahead.
Thank you for the presentation. I firstly wanted to ask about kind of the vessels waiting outside the port of L.A. and Long Beach. We've seen that kind of queue come down over the last couple of weeks. If you can share why you think that has come down and what your outlook is for congestion at L.A. Long Beach specifically? If I may just get my second question now as well. The dockworkers union, the ILWU negotiations, how are those coming along with the contract ending mid of this year? How do you factor that into your guidance, and what's the impact on the spot rates?
If I could ask a third one. Why, with the strong growth in volumes last year and kind of your expectations for the market this year, is growth slowing down this year? Do you have any flexibility to be higher than kind of that 6%-7% this year in terms of volumes? Thank you.
Yes. I will start with the first one. L.A./Long Beach is very visible, and I think under the spotlight, there are a lot of metrics that are being shared on a weekly basis as to how to best monitor the, you know, the bottleneck that is very much prevailing in this terminal. There are a couple of things. Let's remember that today or February is normally a weak month in normal circumstances. There is still a little bit of seasonality in our industry.
We are just around or just after Chinese New Year, and there are a little bit less pressure from a volume perspective for a few weeks, which to some extent also start to assist in clearing maybe some of the congestion in L.A., hence why maybe there's a little bit less vessels. Another thing is, it does not necessarily mean because we see less vessels in the vicinity of the Port of L.A., that those vessels are not being pushed back a little bit further down or for the west or for the east and on their way to L.A.
The way we see that is through you know if a reduction in the span of a couple of weeks at a time where seasonality is also normally you know suggesting that the volume should reduce is already a significance of a new trend. That may be too early to say. I would add to that that when things are starting to get maybe a bit better or seems to be getting a bit better in L.A., situations is worsening in some other terminals, be it at the East Coast or Vancouver to name one.
The congestion and the bottlenecks are still very much there for us as an industry to have to navigate with. The second question that you are referring to, what is our expectation with respect to the negotiation of the unions that should take place in the coming months. Difficult for us to assess what could happen. You know, we know what happened when it last on the agenda. Difficult to say what may happen this time around, but it is indeed adding an additional level of uncertainty as to when the bottleneck might finally ease in this terminal. As we know, with the global network, everything is linked. This may have some knock-on effect elsewhere as well.
There is an uncertainty here, but for us, there is not much we can say as to what we anticipate in terms of potential additional disruptions coming our way. The risk is there, time will tell. To the third question that you raised with respect to our ability to potentially capture additional growth in the market, we could always. As you may remember, the mission or the strategy of the company is to grow when we see opportunity and not to grow or to capture additional market share. If we see opportunities for us to continue to grow and to grow more than the market, we will potentially look at those options and those opportunities.
After having grown by 22% in 2021, when it comes to providing guidance for 2022, we so tend to remain conservative on that front.
Thank you.
One thing I want to emphasize. Also L.A., we really don't know what is the situation or if it's a new trend. What we can see that the vessels waiting in Vancouver a few weeks, and we see some pressure in East Coast terminals such as Charleston, Savannah, and New York. The pressure is in some vessels decreased the speed on the way, wait on the west side of the Pacific. The new regulation or procedure to go to L.A. and they try to reduce the number of vessels waiting directly or close to L.A. I cannot share. I'm not too sure what to say about L.A., the situation or we have a new trend as for L.A.
Thank you. That is very clear.
The next question is from the line of Omar Nokta from Clarksons Securities. Please go ahead.
Thank you. Hi, guys. Yeah, congratulations on a you know phenomenal 2021 and clearly the guidance for this year is quite strong and above expectations. I wanted to ask just about the current climate and how that's affecting your business. I know you touched on it a little bit both Eli and Xavier in the opening comments. And I know obviously the biggest footprint for ZIM is the Transpacific, but in general, are you seeing any direct impacts from the current Russia-Ukraine situation on your activities?
Yes, you're right that obviously we do see some impact, but in terms of the way we manage the services that we have that they call the Black Sea, Ukraine, and we have a service from Ukraine, Romania, and West Russia, the North Sea. We are exiting those two countries, Ukraine and Russia, we are redirecting capacity. From an operational perspective, we are taking actions, and we are making sure that the vessels will find alternative cargo elsewhere. This is what we do. But from a financial impact perspective today, we see a very limited effect. Again, for us, those services do represent a not significant percentage of our overall carry volume. Really, we see when we do take actions that, as of today, with the expectation or the assumption, should we say, that the conflict remains local, for us, we do not anticipate a material effect.
Okay. Thanks, Xavier. You know, obviously one of the big concerns here recently is the surge in oil and commodity prices in general, and how that could potentially start to stress consumer spending. How are you guys seeing that risk, I guess in general and how you're doing the business, but also with respect to the guidance you've given today? You know, how are you viewing this maybe heightened risk of impacts on consumer spending?
Yes. For now, we have to work with what we know. We need to make assumptions when we provide indeed our guidance. We cannot today anticipate what will be the duration of the conflict. We cannot anticipate whether the conflict might spread to other locations and have potential additional impact on trade that would be more relevant to us. We are obviously monitoring, and we continue to monitor the situation. I'm not gonna be saying on a weekly basis because we do it on a daily basis. If there was to be some widening or some additional impact to be anticipated, we would obviously factor those in.
If we had to revisit our guidance, just like we did in the prior year, we would obviously do so. When it comes to the effect, which is very visible today, which is the increased bunkering costs, which is skyrocketing very quickly. We, as you know, have a quite efficient pass-through mechanism that we will continue to enforce to our customers, which is, in a way, a natural hedge type of mechanism. Everything has a limit, obviously, and if the fuel costs were to remain elevated for a very significant duration, then we would obviously need to factor that risk into our future estimates.
Very difficult to say today to anticipate today what will be, you know, the mid price for the second half of the year, which is what is relevant to us when it comes to 2022 guidance, by the way, because as you know could even shift eventually going to be there for most of 2022.
Okay. Yeah. You mentioned just on the bunker fuel, you're indicating that the latest spike is something we're able to pass through, I guess in the short term, and then potentially the long term still needs to be assessed.
Yes.
Did I hear that right? Okay.
Yes. You know, there is a lot of uncertainty ahead, as you rightly pointed out, so we can only make assumptions here. If the situation was to remain or to continue to escalate to a point where the fuel bunker costs would become significantly higher than it is today, I would think maybe if you look at our expectations for 2022, we already had assumed that the average freight rates, at least on the spot market, would gradually normalize and would gradually come down, leaving room in a way for additional absorption of a fuel cost. We are, w e have to monitor and track the situation as it develops.
Great. Yeah. Okay. One more, and I'll turn it over. Just maybe more about the, you know, the business and obviously, for the past several years, Transpacific has been your main footprint. Intra-Asia now has really started to pick up and become over a quarter of your volume. How are you seeing that develop say over the next 12-24 months with, you know, the new ships you're bringing on? Do you see the Asian market becoming just as dominant as Transpacific in terms of your business footprint or potentially getting larger?
That we will see. There is still a lot of catch up to do if Intra-Asia wants to contribute to the same extent that Transpacific does today. But you're right that it is an extremely dynamic trade where we are growing quarter after quarter. Also, of course, the definition of Intra-Asia includes Asia to Australia and also Asia to even North Africa. So it's the wider Asia. I should maybe emphasize here. We've been quite active in growing our volume between Asia to Australia and between Asia to Africa. So w e see quite a lot of opportunity to continue to grow in this region or also within the intra-Asia area. It can very well be that from a volume perspective, we will catch up for the intra-Asia view, in a way. We'll catch up with the prevailing Trans-Pacific trade.
Very good. Well, thank you, Xavier, and congratulations, guys, again on a fantastic 2021.
Thank you.
Thank you.
The next question is Sathish Sivakumar from Citigroup. Please go ahead.
Yeah. Thanks again for the presentation and, again, congratulations on the results too. I got three questions. First one, the booking visibility, right? Xavier, earlier you mentioned that, how resilient the rates are and also you have a strong Q1. You have a good visibility into Q1. If you could actually comment on what are you actually seeing in terms of your bookings on the vessels? Like how much window forward that you can actually see it as of today?
Yes. Today, we continue to see very strong demand from a booking perspective. As I pointed out earlier on, we are just a few weeks after Chinese New Year, so we see the business in bookings coming back faster in 2022 than what used to be the case in prior year, which is a good indication that there is still a lot of unsatisfied demand. As you know, we also have, because of the, you know, the strong demand that we've been experiencing in the weeks ahead of the Chinese New Year, we had a lot of rollover cargo that we have taken on board also during those weaker weeks on and around Chinese New Year.
The recovery volume is, from a seasonality perspective, very strong and it's coming in very fast. Particularly for the first quarter of 2021, it did allow us to conclude that we expect a very strong first quarter in line with the fourth quarter of 2021. I'm sorry, did I say 2021? The first quarter of 2022 is coming in very strong and in the similar type of shape than the fourth quarter of 2021.
Okay, thank you. My second question is actually on the charter capacity. In slide 18, you've given a nice split around how the industry has changed. There, the average duration is 3.5 years, right? That's again industry data, I assume it to be. How does it actually compare for ZIM? What is your average charter duration capacity today?
When we charter or when we secure a new chartering contract, the vast majority of our charter agreements now are signed for a period of between three to five years. I'm leaving aside the long-term charters that we entered into in 2021 for the newbuilding capacity. The one charter agreement that we secure from the usual potential buyers today is three to five. How does that translate when it comes to looking at what is the average remainder of the duration of the contract that prevails today for the 118 vessels that we are operating as of end of 2021? This is a bit more than two years on average. I think it is 26 months or so that the liability that you see on balance sheet as of end of 2022 represent 26 months worth of charter for 118 vessels.
26 months of charter is left, on average, on your portfolio. How does that would tally with the vessel deliveries that you are likely to get in 2023 and 2024?
That, yes.
Yes.
Yeah. You're right. This is very important. We've been working hard as early as the second half of 2020, by the way, to make sure that we were in early 2021 when we decided to first commit with Seaspan for the first 15,000 TEU ships.
We are looking at ensuring that when those vessels start being delivered to us as early as January or February. I think the first one will be delivered to us in 2023, and then one a month, so that we have the ability to either redeliver some of our current fleet capacity or keep that capacity or some of it and grow and increase the capacity of our fleet 2022. We will have the option to do either/or, as technically the delivery of these newbuildings and either renew these contract, some of the contract that will come up for renewal at that time or renegotiate and secure that tonnage for longer. We have 30 vessels that we commit for renewal in 2022.
In 2023, yeah?
Yes.
Okay, thank you. The last question is actually around the CapEx. If you look at your 2021 CapEx, it was about $1 billion of CapEx. I assume that majority of that CapEx is related to equipment, right? Is there any vessel related payments that was done in 2021? How should we think about going into 2022?
Yeah. You're right. Most of the CapEx of 2021 related to equipment, close to $900 million of cash CapEx, related to the 306,000 TEUs that we built in our fleet of containers. We have a little bit of a cash CapEx related to, you may remember, we acquired certain second-hand vessels in the course of in the fourth quarter of 2021. We got delivery of five out of the eight, and so there's been some payments in this respect. A little bit more or less in the first quarter of 2022, when we will get the last three vessels that we acquired in the fourth quarter. Looking into 2022, in terms of cash CapEx, we will have a little bit of the vessel target in terms of equipment. We anticipate maybe around $200 million of additional equipment to continue to renew and rejuvenate our fleet of containers.
Okay. Got it. Thank you. That's helpful. Thanks again for your time.
Thank you.
The next question is from the line of Alexia Dogani from Barclays. Please go ahead.
Yeah, good afternoon. Congratulations, Romain, for a strong performance. I have three questions as well. Just firstly on CapEx, following on the question earlier, if we had $1.1 billion of net CapEx in 2021, how much does this step down in 2022? And also with relation to the debt service payments, that was $1.4 billion, how should we expect that number to fall in 2022? That's my first question. My second question is, I read on the slide that you have the ambition of growing to 1 million TEUs. By what period is that? And should we expect the 125 vessels you currently operate to increase by the 36 that are coming on board to get to that 1 million target?
Finally, can you just give us a little bit more color on what you think the practical implications of the new IMO regulations that are coming into effect next year will mean for capacity? Because when I look at the scrapping rate that Alphaliner expects, it's not significant. I'm just trying to understand, you know, the levers to what happens post the introduction of the regulations next year. Thank you.
Okay. Maybe starting with the CapEx question that you had.
First read the question. The 1 million TEUs.
Yes. The 1 million TEUs refers to equipment, containers. That's the capacity of containers that we have. It's not the capacity-
The million.
the vessel capacity.
$4 million.
Yes. We increased our fleet of equipment from 620,000 TEUs at the beginning of the year, close to 1,000,000 TEUs at the end of the year. That's one thing. We, at the same time, increased our operating capacity when it comes to vessels from 85 vessels that we were operating or 87 vessels that we were operating at the beginning of the year, 2021, to 119 and 125 vessels that we operate today. That's maybe the clarification on the 1,000,000 TEU. 1,000,000 TEU relates here to equipment.
With regard to the question on CapEx for 2022, the overall cash CapEx that we would anticipate, you know, adding the $200 million to the $20 million of equipment, maybe doubling it to add a little bit more on the digital front, to add on our IT investment and also factor for what is left to be paid on the vessel side. $400-$500 million all together, I think should be a good assumption for cash CapEx into 2022. With respect to the last question on the IMO effect or expected impact in 2023.
Yes, difficult to assess what will be the overall effect on the effective deployed capacity in 2023. Just to give maybe some indication. When we look at the fleet that is currently on the water, the 25 million TEU, the 500,500 vessels all together, as of the first of January 2023, half of that capacity will be 15 years old and older. 15 years old and older. Obviously the older the capacity, the vessel, the more difficult or the more challenging it will be for that given vessel to meet the emission regulation criteria.
In 2023, gradually over time, what we anticipate is that quite quickly, the regulator will impose more and more restriction on carbon emission, which will, to some extent, affect the effective capacity as it will impose on the vessel operator to lower the speed of operation. I think there are companies out there suggesting that if we were to reduce the speed by 5%, it will have an effect of 7% over the effective capacity. That's what we are referring to when we think that there will be a lot of pressure on effective supply in 2022 and onwards.
Thanks, Xavier. Can I just check on the debt service payments? Should we expect that number to be flat year-over-year or should we expect those 22 vessels that need to be recharged or that will price in at a higher rate and drive a little bit of an increase? I'm just trying to understand what drives the $150 million increase in the depreciation. Obviously, CapEx is coming down and the cash CapEx is coming down, so should the debt service payment go up?
You're raising a good point, Alexia. Let me just maybe clarify here. As I mentioned, now all the vessels that we currently operate, or almost all the vessels that we currently operate are operated under long-term charter agreement. Which means that from an accounting perspective, everything is classified as one of these assets on the balance sheet, and the payment is a lease liability. The debt that you see on the balance sheet is mostly made of the lease liabilities that come as a result of us entering into those contractual obligations with the current provider. On the depreciation side, if you look at the depreciation line, what is it that we depreciate?
It's the asset, or one of these assets that we've just booked on balance sheet when we secure those contracts, and you have the depreciation of the containers, of the equipment. When we guide for 2022, you see that there is $1.5 billion difference between EBIT and EBITDA. This is the amortization of our assets, our assets being mainly the vessels I just talked about and the containers. Take $100 million for containers, the rest is assets. These assets or the $1.4 billion that you see in amortization will or should tie pretty much perfectly with the debt service, because the debt, as we said, is also only the reflection of those commitments.
The debt service is nicely mirrored with the amortization that you see on balance sheet. The one thing that I just would like also to highlight, or two things that I would like to highlight to complete the picture here is that first, as a result of the new relationship with 2M, we are no longer buying slots from our partners, as we are only swapping slots. There is no longer any financial exchange between us, Maersk and MSC. Meaning that, from a cost perspective, the chartering or the slot buy is no longer there in 2022 as from the first of April onwards. That contributes as well to reducing our overheads.
I can, yeah?
Second and last, very important as well, just for the record time, that all our charter are time charter, meaning that if you look at the amortization of $1.5 billion, that includes not only the depreciation of the asset itself, but also all the running costs of operating those assets, meaning the crew related, the cost and the technical management of the vessel.
Just thank you for that comprehensive answer, Xavier. Actually if you don't mind, can I just ask a very quick one? On your guidance for 2022, what is the bunker fuel assumption within the guidance range you've given?
You know, I've got to say this is extremely relevant for me to disclose that information. As I mentioned earlier, we are working under the assumption that any increase in fuel cost would be passed on to our customers via the BAF of the bunker adjustment surcharge.
Okay, great. Thank you for that.
The next question is from Sam Bland from JP Morgan. Please go ahead.
Yeah, thanks for taking the question. I've got three things. The first one is on cash tax. This has been quite low up till now. Can we have a, you know, bit of color on how to think about cash tax, particularly in 2022? Is there a catch-up element to that? The second one is on your exposure to contracted rates. I think across the whole portfolio, that was about 25% of volume was on contracted rates. Is it still roughly around that kind of level or would you know, would you like to increase it? The third question is on the 36 new ships on order. Could you talk about these, how much higher the unit cost is on operating those ships versus the ones you ordered or pre-COVID, as I guess the charter costs on those 36 new ships are higher? Thank you.
Okay. The first one on the cash tax, yes, in 2022, we will be paying what is, whatever is left due, in relation to 2021, and that is $500 million we will pay. We will also pay on account of what is likely to be our overall tax liability of 2022. There will be, from a cash perspective, a catch-up in 2022. That's for the first question. The second question is regards to contract. We indeed continue to see that or expect to lock in 60% of our Trans-Pacific volume for contract cargo. Since Trans-Pacific volume accounts for roughly half of the overall volume that we carry, that's how we come to the 25% of the contracted cargo. That number normally should be could be similar year-over-year. We should not expect a significant shift in this respect.
With regard to your third question and the expected cost of operation of the newbuild capacity that we've ordered at Seaspan and others. Actually, the cost of operation will be lower when we will get delivery of that capacity compared to the cost of operating the capacity that we operate today. This is exactly why we entered into those contracts early in 2021, because we wanted to get away from the too high reliance that we had on the spot charter market for vessels that we knew we had a long-term use for. You have to look at those vessels in terms of costing in light of the newbuilding market, newbuilding price, as opposed to the chartering market.
The cost, the TEU of this new, more efficient and greener tonnage will actually reduce compared to the cost that will reduce compared to the capacity that it will replace when we take delivery of this vessel as opposed to increase.
Just to be sure, is that a lower cost versus chartering a ship today or a lower cost versus, let's say, the pre-COVID level?
Oh, I mean, it depends. You know, if you look at the chartering market, it's been extremely volatile over the past few years. Pre-COVID, the chartering market was at a rock-bottom low level, so I wouldn't suggest that this is the right benchmark to take. Clearly, if you compare the cost of operation of a build in 2021 and what we expect to see in 2022 with what will be the cost in 2023 and beyond once we take delivery of those vessels, it actually will improve.
Understood. All right, I got it. Thank you very much.
Thank you.
This ends the Q&A session, and I would like to hand back to ZIM CEO, Mr. Eli Glickman, for closing comments.
Thank you very much, operator. 2021 was a remarkable year for ZIM. In our first year as a public company, we delivered record results, significantly exceeding all our original projections. This performance was driven by unusual market conditions which pushed freight rates to historical highs, but also thanks to our proactive strategies which enabled us to outperform in terms of growth and profitability. Today, we are sharing these remarkable results with our shareholders. In total, since our IPO, we are returning to shareholders approximately $2.6 billion at $21.5 per share. We also provided a strong outlook for 2022, according to which we expect our 2022 performance to be similar to 2021. My optimism about ZIM's future is rooted deeper than our anticipated performance in 2022.
In the past year, we utilized our strong cash generation to strengthen ZIM operationally and commercially to improve our competitive position. We are excited to carry this strong momentum forward. Reinforced by our thorough view of container shipping, I am very positive about ZIM's prospects and believe we will continue to generate sustained profitability and deliver long-term value to our shareholders. Thank you again for joining us today. Have a good day.
Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.