Yang Ming Marine Transport Corp (陽明海運), the nation’s second-largest container shipper by fleet scale, yesterday said it expected to return to the black this month, with profitability further rebounding in the third quarter on the back of strong seasonal demand, improving oversupply and falling crude oil prices.
Based on that outlook, the company is also considering ordering five container ships of between 140,000 and 160,000 twenty-foot equivalent units (TEU) for about US$575 million, a company official said.
“The company’s profitability in the third quarter — the seasonal high for the industry — will definitely be stronger than in the same period last year,” Yang Ming chairman Frank Lu (盧峰海) told a media briefing after hosting the company’s shareholders’ meeting.
Although the eurozone’s debt problem continues to slow the global economy, it would have only a limited impact on container shipping industry demand, because container vessels usually carry heavy and common essentials, Lu said.
Major global container shippers’ control of capacity growth have also helped rein in an oversupply, Lu said.
The latest research by Alphaliner showed that global container vessels belonging to non-operating ship owners account for 52 percent of all ships, but those under construction account for only 37 percent, confirming the trend of declining oversupply in the near term, Lu added.
Lu said the company was confident of returning to the black this month and expected to make more profit in the third quarter, hoping to turn a profit for the full year.
Freight rates for routes between Asia and North America, as well as intra-regional routes in Asia, are expected to remain above cost in the second half of the year, Lu said.
Fuel costs, one of the heaviest burdens for the industry, might also be maintained at the current reasonable level of less than US$100 a barrel, he added.
Yang Ming’s fuel costs account for 26 percent of total costs, down from 28 percent in the first quarter, helped by the declining trend in crude oil prices, the company said.
Yang Ming is also considering ordering new container vessels to expand its scale and achieve higher efficiency.
Lu said the company was planning to order five large vessels later this year as shipbuilding costs fall because of the global economic downturn.
However, the proposal will need to be approved by Yang Ming’s board of directors after the company’s management team confirmed the details about the plan in a meeting at the end of the month.
Yang Ming’s shareholders yesterday approved the company’s proposal to raise funds through a private placement of no more than NT$800 million (US$26.73 million) to strengthen the company’s finances and invest in the new ships.