Yang Ming Marine Transport Corp (陽明海運) has turned conservative about the market’s outlook as it faces pressure from clients to renegotiate freight rates.
The world’s ninth-largest cargo shipper in terms of shipping capacity was in March upbeat about freight rates, but yesterday told investors that soaring inflation worldwide and the ongoing Russia-Ukraine war pose strong headwinds ahead.
“Forecasting how rates would change is difficult given the uncertainty in global business outlook,” Yang Ming chief operating officer Chang Chao-feng (張紹豐) said. “Because spot rates have plunged, we do face pressure from some clients demanding rate adjustments for long-term contracts.”
Photo courtesy of Yang Ming Marine Transport Corp
In principle, Yang Ming offers short-term discounts in response to such requests, Chang said.
Even though the contract terms do not allow price revisions, the shipper could be flexible to maintain long-term relations with clients, he said.
Average shipping rates slid to US$2,854 per twenty-foot equivalent unit in June, falling for the fourth straight month from US$3,417 in February, company data showed.
Falling rates caused Yang Ming’s gross margin to drop from 70.58 percent in the first quarter to 66.2 percent in the second quarter, although it was still higher than 60.17 percent a year earlier, it said.
The shipper expects December to be a peak month as the Lunar New Year holiday would fall in January next year, so most clients would want to ship their goods at least a month earlier, it said.
However, the outlook for freight rates in the first half of next year remains clouded, Yang Ming said, citing factors such as consumption strength, inflationary pressure, shipping demand, new vessels and seaport congestion.
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