More bad news for sea freight companies Price declines continue Ship’s crew

From Mike Wackel (The Loading Star) –

Shipping companies are writing off the first six months of this year and are counting on an increase in inventory demand in the second half to meet sharply reduced full-year earnings forecasts.

The airlines’ spectacular financial results of the last two years have come to an abrupt end and this year’s results are facing a harsh reality check.

The latest airline to reveal the extent of the decline in liner shipping is Israeli shipping company Zim. what said yesterday It expected to post ebit of just $100 million to $500 million this year after posting net income of $4.63 billion for 2022 and $4.65 billion the year before.

Meanwhile, the latest Ti Insight ocean freight rate tracker The Transport Intelligence report suggests there is more bad news for airlines hoping that spot prices have bottomed.

“Further erosion of sea freight rates is to be expected in H1 23,” the report said. “In addition to falling demand, the additional capacity coming to market in the second half of 2023 and (in) 2024 will be another factor pushing rates down.”

Notwithstanding some delays in ship delivery dates due to labor issues and rejections from shippers and NOOs, a wave of 2.48 million TEUs of newbuild tonnage is expected this year, followed by 2.95 million TEUs in 2024, according to Alphaliner data.

Currently, the container ship order book represents around 30% of the global fleet of 26.6 million.

It was widely expected that scrapping of older tonnage would accelerate this year and mitigate some of the impact of newbuilding, but container ship owners who may have been considering scrap sales are being skewed by a surprisingly upbeat charter market.

In fact, there seems to be a disconnect between the anemic cargo market and the charter market, with brokers reporting renewed interest and an increase in daily rental rates.

Shipping companies will want to get their more fuel-efficient and greener newbuilds into service as soon as possible, so incumbent vessels on network loops are either cascaded into secondary voyages or placed in hot or cold lay-ups.

The authors of Ti Insight agree with other liner analysts that the current strategy of ignoring journeys is not working and will not work unless volumes unexpectedly increase. The report states: “Unless significant and permanent capacity cuts are made, rates will continue to fall and temporary cuts will not be enough to support weaker ocean freight volumes.”

Additionally, Ti Insight says that “the inventory correction process could take a couple of quarters” and “will continue to contribute to weaker volumes.”

Still, analysts are relatively confident that the second half of the year will be more profitable for the liner industry, and believe that an increase in freight “could halt the decline in rates.”

(c) Copyright Thomson Reuters 2023.

Related Articles

Back to top button

Subscribe To Our Newsletter

Don't miss new updates on your email