Global News Carriers on course for healthy year despite tumbling profits

The container shipping industry reported a net profit of $8.9 billion in the second quarter, and while that represents a huge 86% decline from what were record financials in the year-ago period, carriers remain on course for a profitable 2023, according to analyst John McCown.

The second-quarter fall in earnings was the fourth straight quarterly downturn after almost two years of record net income sparked by pandemic disruptions, but the founder of Blue Alpha Capital said the falling market was showing signs of ameliorating.

“While 2023 net income will be down significantly from 2022, my analysis of the latest data continues to indicate that the industry profit in 2023 will still be well above record profit levels prior to the pandemic,” US-based McCown predicted in his latest monthly report on container shipping.

Drewry has maintained its forecast for container shipping profits of $15 billion in pre-tax earnings this year, but the maritime consultancy expects ocean container carriers to report an operating loss of $20 billion in 2024 — double the losses forecast in March — as weak demand, overcapacity and predatory pricing by some carriers weigh on the shipping business.

Rate benchmarking platform Xeneta took a cautiously optimistic view of the market Thursday, noting that spot rates have moved above contract rates on the main trade corridors.

“It’s tough out there,” Xeneta’s chief analyst Peter Sand said in a market update. “But carriers will take heart from the fact that spot rates have now moved up above contracted rates on the world’s leading trade corridors. As a result, we may finally see some upward pressure on long-term rates.”

Average Asia-North Europe short-term rates assessed by Xeneta, excluding terminal handling charges at origin and destination, were at $1,568 per FEU on Thursday compared with long-term rates of $1,414/FEU. Average spot rates of $1,617/FEU for the Asia-US West Coast trade were $400 per container above the long-term contract market.

“Shippers who have been playing the spot market to save money will now be looking at shifting volumes to contracted agreements, which may offer better value,” Sand said. “This could elevate prices.” ‘Post pandemic normality’ While demand remains weak on the major trade lanes out of Asia, data from Container Trades Statistics (CTS) reveals that volume is not far off year over year and pre-pandemic levels.

Global first-half volume of 84.3 million TEUs was down 4.3% year over year, but still slightly above the first-half volume of 84.1 million TEUs in pre-pandemic 2019, Nigel Pusey, CEO of CTS, told the Journal of Commerce this week.

And worldwide volume of 44.2 million TEUs in the second quarter was down just 2.2% compared with the same period last year when demand was filling all available capacity.

The first quarter of 2023 proved to be the trough in terms of volumes, Alphaliner wrote in its newsletter this week. All carriers showed an increase in liftings in the second quarter compared with the first three months of the year, with Zim Integrated Shipping Services, HMM and CMA CGM logging gains in the double-digits.

Sea-Intelligence Maritime Analysis noted in a recent Sunday Spotlight newsletter that after two highly profitable years for the carriers, the market was shifting into a “post-pandemic normality.”

“What is important to gauge, however, is where that new equilibrium will be, and whether we will once again see the loss-making years of the last decade,” Alan Murphy, CEO of Sea-Intelligence, wrote in the newsletter.