Global container shippers may find it challenging to further raise freight rates after the Lunar New Year holiday despite success with a rate restoration plan earlier last month amid strong seasonal demand, according to reports issued by brokerages.
The Transpacific Stabilization Agreement (TSA) announced last week that its member carriers are recommending a guideline of US$300 per forty-foot equivalent unit (FEU) general rate increase for lines between Asia and the US, effective beginning March 15, followed by an undetermined rate increase beginning on May 1.
The move comes after TSA members boosted rates by US$300 per FEU for routes to North America last month.
“Thanks to strong demand before the Lunar New Year, the [average] load factor of major [global] container shippers has amounted to over 90 percent, offering support to freight rates for long-haul routes,” Capital Securities Corp (群益證券) said in a research report last week.
The rise in freight rates, which already surpass the break-even point, would help container shippers increase their earnings this quarter and offer more incentive for shippers to further raise rates, the report said.
However, Capital Securities said container shippers may face difficulty raising rates over the near future and would even see rates decline from the current level because of ongoing oversupply issues.
Alphaliner, a research institute for the container shipping sector, said in a recent report that global shipping demand may rise 4.6 percent this year from last year, while supply may increase by 7.1 percent annually, as several shippers last year decided to delay deliveries of their orders against the sluggish market sentiment.
A week-long closure of Chinese factories for the Lunar New Year holiday is another factor weakening shipping demand for this month, Capital Securities said.
Last month, Evergreen Group (長榮集團) vice chairman Bronson Hsieh (謝志堅) said the container shipping sector would see rising demand for this year amid global economic recovery.
Hsieh said Evergreen Marine Corp (長榮海運), the nation’s largest container shipper in terms of fleet scale, intends to replace some of its smaller vessels with new, more efficient vessels.
However, overall, the company has no plans to substantially expand its fleet this year, he said.
For the whole of last year, Evergreen Marine saw consolidated revenue drop 1.28 percent to NT$139.2 billion (US$4.59 billion) from 2012, according to the company’s filings to the Taiwan Stock Exchange.
Consolidated sales of Yang Ming Marine Transport Corp (陽明海運), the nation’s second-largest container shipping firm, saw its sales fall 9.74 percent from a year earlier to NT$118.63 billion last year, while those of the third-largest, Wan Hai Lines Ltd (萬海航運), registered an annual fall of 4.67 percent to NT$59.69 billion.
The three Taiwanese shippers have not yet released their full-year earnings figures for last year.
During the first three quarters of last year, Evergreen Marine posted a net loss of NT$2.19 billion, or losses per share of NT$0.63.
Taishin Securities Investment Advisory Co (台新投顧) forecast that Evergreen would post a net profit for last year of NT$290 million, or NT$0.07 per share, after the shipper booking non-operating income from sales of vessels and containers.
Yang Ming reported net losses of NT$4.28 billion, or losses per share of NT$1.31, during the first three quarters of last year, while Wan Hai reported a net profit of NT$880 million, or NT$0.4 per share, over the same period.