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August 28 2023

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August 28, 2023 | Journal of Commerce 11 www.joc.com Special Report Container Shipping Quarterly into the black with a net profi t of $107 million. After two years of record profi ts, the container shipping industry is on track for another good year, with pre-tax earnings projected to hit $15 billion, according to maritime analyst Drewry. But the picture darkens considerably in 2024, when carriers will report combined EBIT losses of $20 billion — double the amount Drewry forecast in March — as weak demand, newly delivered capacity and predatory pricing by some carriers continue to weigh on rates and revenue. "We now think that spot and contract rates combined will slide by a third next year following an anticipated 61% decline this year," Simon Heaney, senior container research manager at Drewry, noted in a mid-August market update. Huge capacity injection Arguably the greatest challenge to the continued profi tability of carriers in a weak demand environ- ment will be the staggering amount of capacity coming online over the next 18 months. The combined capacity of the global vessel order book currently stands at 7.3 million TEUs, equal to 28% of the active fl eet, according to Sea-web, a sister company of the Journal of Commerce within S&P Global. Niels Rasmussen, chief ship- ping analyst at industry associa- tion BIMCO, said the order book is so large that ship deliveries are expected to exceed the previous full-year record of 1.7 million TEUs for three years in a row. Drewry THE GLORY DAYS for ocean carriers are now fi rmly in the rearview mir- ror, as profi tability tumbles o the record highs of the past two years and lines face the challenge of bal- ancing waves of new capacity fl ood- ing online with feeble green shoots of demand. That will be no easy task in a global economy weighed down by high infl ation and a cost-of-living crisis, on top of major cargo desti- nation markets of North America and Europe struggling to pare down surplus inventory. The reporting of fi rst-half earnings over the last few weeks by ocean carriers show most are still making signifi cant profi ts. Net profi t at Maersk was $3.8 billion, CMA CGM banked $1.3 billion while Hapag-Lloyd recorded a net profi t of $3.1 billion. Others such as Zim Integrated Shipping Services and Yang Ming, however, have felt a sharper sting from North American imports from Asia easing from pandemic-induced highs since September. Zim reported a second- quarter net loss of $213 million, com- pared to a net income of $1.3 billion in the same quar- ter last year, and expects to post a full-year adjusted loss of between $100 million and $500 million in earnings before interest and taxation (EBIT). Yang Ming in the second quarter reported a net loss of $4.27 million, its fi rst quarterly loss since 2020, although a fi rst-quarter profi t pulled its six-month earnings up Widening supply-demand gap to cut ocean carrier profitability By Greg Knowler "Spot and contract rates combined will slide by a third next year following an anticipated 61% decline this year."

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