Major container shippers are to experience revenue and earnings pressures in the near term as the balance between market demand and capacity supply has deteriorated, Capital Investment Management Corp (群益投顧) said in a report on Tuesday.
The container shipping industry typically experiences a minor peak season before the Lunar New Year holiday.
However, the freight rate rebound before the holiday this year appeared relatively weak compared with historical patterns, the investment consultancy said.
Photo: CNA
“The market sees sluggish demand following the holiday. Freight rates could remain weak and consolidate in the short run,” it said.
Spot freight rates began to plummet in the third quarter of last year and continued the trend in the following quarter, as the low season arrived and port congestions had greatly eased.
The Shanghai Containerized Freight Index, which reflects spot freight rates on major routes, had fallen for three consecutive weeks following the end of the peak season before the Lunar New Year holiday late last month.
Capital Investment Management said that freight rates are unlikely to experience further growth in the traditional low season this quarter, and shippers could face stronger operating pressure due to a further decline in shipping volume.
Freight rates might ease due to a rise in new shipping supply during what is usually a peak season from the second to the third quarter, before the industry enters into a low season in the fourth quarter, the company said.
“In 2023, as the negative factors could go from the demand to supply side in the container shipping market, spot freight rates might still be weighed down in the mid to long term,” it said.
Based on forecasts by maritime consultant Alphaliner, growth in demand for freight is slowing, and is expected to reach just 1.4 percent this year, while capacity supply growth is expected to reach 8.2 percent.
Next year, freight demand and capacity supply are expected to increase by 2.2 percent and 8.8 percent respectively, suggesting a persistent oversupply in the market.
Yang Ming Marine Transport Corp (陽明海運), the nation’s second-largest container shipping company by fleet size, yesterday reported a consolidated revenue decrease of 22.26 percent monthly and a drop of 64.27 percent annually to NT$12.72 billion (US$423.04 million).
Last month’s revenue was the lowest since July 2020, when Yang Ming posted NT$12.25 billion in revenue, company data showed.
Yang Ming attributed the monthly decline in revenue to sluggish market demand, which caused a continued drop in freight rates.
The week-long Lunar New Year holiday also led to a decrease in operating volume and affected the company’s sales performance, it said in a statement.
Challenges remain ahead, the shipper said, citing the war in Ukraine, global inflation and rising interest rates, as well as emergent environmental regulations globally.
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