Confirmation that container shipping lines are operating in the red came today with the release of Japanese ocean carrier ONE’s results for the past quarter.
In the second quarter of its fiscal year, ending 30 September, Ocean Network Express (ONE) saw net profit slump to just $187m from $5.5bn in same period of last year. List Of Air Cargo Carriers
Moreover, ONE’s ebit for the period fell to just $58m, as voyage results slid into the red.
For the six-month period, ONE recorded a net profit of $700m, down 96%, but said it now expected a full-year profit after tax of $851m, compared with $15bn in the prior year, “due to the deterioration in the freight market caused by declining demand”.
In fact, ONE expects to make an operating loss in the next two quarters, predicting an ebit of -$191m for the six months.
“Despite the start of the peak season, there was no strong recovery in cargo movement,” said ONE.
“The supply-demand balance softened due to an increase of newly built vessels, and short-term freight levels did not sustain their upward trend,” it added.
Total revenue for the quarter came in at only $3.5bn, compared with $9.4bn the year before, reflecting the collapse in both short-term and long-term rates.
Rates continued falling, despite load factors on ONE’s main transpacific and Asia-Europe headhaul routes hitting respectable 95% and 92% utilisation levels, as a consequence of tight capacity management.
Liftings were actually up 7% on the previous year, at 3,087,000 teu, but average rates plunged to $1,150 per teu, versus $3,232 per teu previously.
“In North America, cargo movement showed some momentum in August, but lacked sustainability against the backdrop of weak general consumption and other factors,” said ONE.
It said that in Europe there had been “a gradual recovery trend”, but added that it “did not lead to a fully fledged recovery in cargo demand”.
“The oversupply of tonnage, caused by the delivery of a large number of newly built vessels in this fiscal year, is expected to continue through the second half,” said ONE, adding that it expected the freight market to “remain weak” during this period.
The carrier said its response to the weak market fundamentals would be to continue its blank sailings strategy, as well as “service restructuring in line with the mid-term demand forecast”.
Indeed, service suspensions are already planned, and last week THE Alliance partners Hapag-Lloyd, ONE, Yang Ming and HMM announced they were suspending an Asia-North Europe loop and a transpacific Asia-US east service from mid-November.
ONE said it would focus on returning surplus leased containers, as well as improving container repositioning efficiency in an endeavour to drive down costs. Other initiatives include increasing special cargo shipments and service expansions in growing markets such as Latin America east coast to North Europe.
According to Alphaliner data, ONE is ranked sixth in the ocean carrier league table, with a fleet of 225 vessels, for a capacity of 1.7m teu, and has an orderbook of 515,000 teu. It has received two 24,000 teu ultra-large vessels this year of a series of six it is taking on long-term charter.
The Q3 results season is now well under way, with Maersk publishing its results on Friday and Hapag-Lloyd next Thursday.
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