Evergreen Marine Corp (長榮海運) is expected to swing into profit this year as market conditions improve in the global shipping industry, which has been battered by falling freight rates due to a prolonged supply glut, analysts said.
The company is forecast to post profit of NT$689 million (US$22 million) for this year, compared with an estimated loss of NT$5.65 billion for last year, a Capital Investment Management Corp (群益投顧) report published on Jan. 19 said.
Signs the container shipping industry had bottomed out gradually surfaced toward the end of last year, as rising operating pressures began to force carriers to exit markets or cooperate among them, the report said.
The signs included the collapse of South Korea’s Hanjin Shipping Co in the third quarter, which had led to higher expectations of a decrease in supply, and a further dip in the number of new vessel orders, the report said, adding that shipyards have also been affected by the shipping industry’s downturn.
In addition, Maersk Line’s announcement of a shift in strategy from building large ships to acquiring its peers implied that the competition in large-vessel fleets among global shippers in recent years might gradually end, it added.
Freight rates have rebounded since the beginning of the Lunar New Year peak shipment season, which began on Dec. 16 last year, the report said, citing Shanghai Containerized Freight Index data.
However, whether momentum from the freight rate hike will continue after the Lunar New Year rush requires further observation, it added.
Looking ahead, the industry continues to face the challenges of higher fuel prices and flattish demand, while shipping capacity might continue to grow at a faster pace this year compared with last year, as supply shortfalls caused by Hanjin’s collapse were quickly replaced by competitors, the report said.
Shippers’ operations might continue to be contingent on their determination to reduce shipping supply, it added.
Evergreen Marine consumes 2 million tonnes of fuel annually, the report said, adding that each US$10 movement in the price of fuel would affect the company’s earnings per share by about NT$0.17.
The firm is expected to continue to add to its total shipping capacity of 550,000 twenty-foot-equivalent units (TEU) with new cargo vessels in the next two years, the report said.
Evergreen Marine is to add five leased 14,000 TEU ships to its fleet this year, as well as take delivery of six 2,800 TEU vessels to replace obsolete ships, it added.
Next year, the company is scheduled to take delivery of 10 2,800 TEU ships, as well as two 18,000 TEU vessels, the report said.
Digestion of excessive supply might continue to rely on growth in demand, as well as the integration or exit of shippers, and further consolidation is likely to continue as the financial situation of some shippers continues to deteriorate, it said.
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