Mon, Jan 07, 2019 - Page 15 News List

Rush orders’ end to foil shippers

By Chen Cheng-hui  /  Staff reporter

Major container shippers are to see earnings pressure in the near term, despite an agreement between the US and China to temporarily put off additional tariffs, Yuanta Securities Investment Consulting Co (元大投顧) said on Wednesday.

Freight rates on western and eastern US routes have risen to above US$2,000 and US$3,000 per twenty-foot equivalent unit (TEU) respectively, driven by rush demand in the second half of last year on concerns over the trade dispute, as well as early restocking demand before the Lunar New Year, the investment consultant firm said.

While shipping volume on the US routes is expected to remain stable in the short term and oil prices have declined by 20 to 30 percent, shipping firms might see challenges after the end of rush orders, which would cap earnings growth, Yuanta said in a report.

Based on forecasts by maritime consultant Alphaliner, growth in demand for freight is slowing and expected to reach just 4.1 percent this year from 4.5 percent last year, while supply growth is predicted to fall from 5.9 percent to 3.9 percent.

“This indicates no major improvement to the supply and demand dynamics, with the trade spat still having a great impact on shipping demand,” Yuanta analyst Jennifer Chen (陳娟娟) said.

“We expect that the capitalization of operating leases after the implementation of IFRS 16 will affect financial numbers in the short term,” Chen said, referring to an international financial reporting standard that provides guidance for leases. “As a result, we remain conservative on the outlook for the container shipping industry’s earnings in 2019.”

Evergreen Marine Corp (長榮海運), the nation’s biggest shipping line, reported a net loss of NT$398.75 million (US$12.92 million) in the first three quarters of last year, with total sales of NT$120.04 billion.

The shipper’s sales for last quarter are expected to increase 3.7 percent to NT$46.56 billion from NT$44.91 billion the previous quarter, while net income would rise to NT$1.73 billion from NT$708.43 million in the third quarter, with earnings per share (EPS) of NT$0.38, Yuanta said.

EPS would reach NT$0.29 for the entire last year, but could fall to NT$0.21 this year, as oversupply and trade concerns persist, it said.

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