Major container shippers are set to see little or flat growth in the second half as demand remains tepid in the cyclical high season, Jih Sun Securities Investment Consulting Co (日盛投顧) said yesterday.
Jih Sun said in a report that shippers led by Evergreen Marine Corp (長榮海運) and Yang Ming Marine Transport Corp (陽明海運) began adjusting their operations last month in the face of oversupply in the marine cargo transport business.
Most shippers felt pressured by the cost of idling 10,000 20-foot-equivalent unit (TEU) freighters, the brokerage said.
In particular, shipping availability on the European route had outpaced the average weekly demand of 260,000 TEU by 25 percent, it said.
Jih Sun analyst Chang Li-chun (張立群) said the oversupply comes after shipping companies overestimated market demand for marine cargo in the first quarter, leading to precipitous drops in average freight rates.
The Shanghai Containerized Freight Index (SCFI), which tracks spot rates of container shipping containers from Shanghai to 15 major destinations, stood at 719 points on Wednesday, down 4.1 percent from the previous month and 36.6 percent from a year earlier, according to Jih Sun’s tallies.
So far this quarter, the SCFI averaged 703 points after rebounding from a historic low of 549 points in late July, but the figure remains 30.1 percent lower than that in the first quarter, Chang said.
In response to the declining rates, shipping companies have reassigned their larger freighters with capacities higher than 8,000 TEU to replace 6,000 TEU vessels operating on the US route.
However, their action is likely to worsen the cutthroat price competition that has taken hold in the sector so far this quarter, Chang said.
Chang said that the forecast for the global shipping sector is beset with oversupply.
The brokerage forecast that cargo demand growth would be 3 percent for the industry this year, while an increase in shipping capacity is anticipated to reach 8 percent for the year.
Chang said that he is expecting the SCFI to return to the 920 -point benchmark next year, but the index has little chance of returning to the 1,071 point record high seen last year.
Chang said that freight operators with long-term contracts are likely to be less affected by the slump than those without such agreements.
Evergreen Marine's net income in the first half came to NT$1.37 billion, or NT$0.39 per share, improving dramatically from losses of NT$1.54 billion or minus NT$0.44 recorded in the same period last year.
In the first six months of this year, Yang Ming reported net income NT$292 million or NT$0.09 per share, up from losses of NT$1.34 billion or minus NT$0.41 last year.
Shares in Evergreen Marine have tumbled 38.39 percent so far this year and closed 1.43 percent lower at NT$13.8 yesterday in Taipei trading, while those of Yang Ming have fallen 41.54 percent this year and ended down 2.48 percent to NT$9.85 yesterday.
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