Carriers off to a poor start in 2018

Container carriers’ earnings have tumbled in the first quarter of 2018 and the majority of shipping lines posted negative earnings for the start of the year.

News ID: 80104

Date: 03 July 2018 - 12:39

While several carriers say they still expect to meet their financial targets for the full year, the chances for a substantial earnings recovery in the coming quarters are rapidly diminishing, reported by MANA correspondent.
Rising bunker and vessel charter costs, coupled with weak freight rates and continued supply side pressure from the delivery of new containerships, all weigh down on carriers’ margins. The shipping lines’ failure to secure any meaningful rate increases for the Transpacific annual service contracts on 1 May, will also limit the carriers’ ability to turn their results around for the rest of the year.

Faced with the stark choice of cutting back on capacity or risking continued freight rate weakness, carriers have thus far chosen the latter course. Average capacity operated by the top-13 carriers has increased by 9.1% year-on-year, as essentially everyone is still chasing market share at the expense of securing higher freight rates.

Out of the aforementioned 13 carriers, Hyundai Merchant Marine was the only one to cut down on its operated capacity. This was however offset by Hyundai’s slot purchases from Maersk and MSC on the Asia - Europe and Asia - USEC
routes, which more than compensated for the reduction in the carrier’s operated capacity. The aggressive capacity additions are expected to continue through the summer, with a raft of newbuildings due to come on stream. Charter rates will maintain their upward path on the back of strong vessel demand.