Taiwanese cargo shippers are expected to benefit from an anticipated freight rate increase in the second half of this year, as the global shipping industry continues to recover from a supply glut, SinoPac Securities Investment Service Co (永豐證券投顧) said.
Danish Maersk Line, the world’s biggest container shipping line, which reported an operating loss of US$80 million last quarter, is expected to raise its rates and see earnings increase by US$1 billion this year, SinoPac Securities analyst Yili Chen (陳宜里) said in a report on Friday.
The price hike by the market leader would have the most profound effect on the prices of shipping contracts to North American destinations, Chen said, adding that prices might rise as high as US$600 per 40-foot equivalent unit.
Idle shipping capacity fell from 1.37 million 20-foot equivalent units (TEU) at the beginning of March to 503,000 TEU toward the middle of last month, representing 2.5 percent of total shipping capacity across the globe, Chen said.
With carriers operating at 95 percent capacity and idle shipping capacity falling, these have set the conditions for price increases, Chen added.
The industry’s supply glut woes are expected to continue diminishing as global shippers have decommissioned vessels representing 750,000 TEU in capacity, as well as delayed the delivery of new vessels representing 250,000 TEU in additional capacity, Chen said.
The capacity cut has been fruitful, bringing this year’s expected capacity growth to 3 percent, down from a previous estimate of 3.4 percent, while demand is projected to grow 4.6 percent, Chen said, citing findings by maritime consultant Alphaliner.
On the back of improving market conditions, Chen expects Evergreen Marine Corp (長榮海運), the nation’s largest container shipper in terms of fleet size, to see accelerated growth in sales and profits in the next two quarters as it deploys new capacity for North American contracts and leverages shipping alliance cost savings.
Evergreen Marine last quarter returned to the black from a streak of operating losses with net income of NT$310 million (US$10.3 million).
The company’s operating margin also turned positive last quarter, at 2 percent from minus-2.9 percent the previous quarter and was one of the best among its peers, reflecting the positive impacts from a recovery in freight rates, a general improvement in trade growth and a higher market share following Hanjin Shipping Co’s withdrawal from the industry, as well as significantly lower losses from its associates and joint ventures.
Evergreen Marine is predicted to end this year with earnings of NT$6.7 billion, or earnings per share of NT$1.91, SinoPac forecast.
After reporting an operating loss of NT$900 million last quarter, troubled Yang Ming Marine Transport Corp (陽明海運) is also forecast to post its first profitable quarter this year for the April-to-June period, Chen said.
The shipper is likely to end the year in the black, with earnings of NT$2.21 billion, or earnings per share of NT$1.41, as its capacity and freight rates rise, Chen said.
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