Yang Ming Marine Transport Corp (陽明海運) yesterday said that uncertainties remain for the global shipping market in the first half of next year, and that the company would adopt a cautious approach to its operations.
“The global shipping market continues to be affected by overcapacity, high inventory, international geopolitical tensions and the decline of purchasing power due to high inflation,” Yang Ming Marine Transport said in a document released after the company’s earnings conference.
“The cargo demand before the Lunar New Year holiday is still uncertain, depending on the recovery of consumer demand,” the company said. The Lunar New Year holiday takes place in February.
Photo: CNA
Citing October forecasts made by maritime research consultancies Drewry, Alphaliner and Clarksons, Yang Ming — Taiwan’s second-largest container shipper and the world’s ninth-largest by fleet capacity — said that “supply will exceed demand from 2023 to 2024,” adding that the oversupply of ships in the global market is expected to converge in 2025 at the earliest.
In other words, the issue of supply-demand imbalance is set to persist next year, presenting an operational challenge that global shipping companies will need to address, the company said.
Other challenges included China’s weak growth momentum for next year, whose growth the IMF had last month forecast to slow to 4.6 percent, down from 5.4 percent this year, the company said.
Moreover, the impact of a drought that is squeezing shut the Panama Canal is worse than expected and has disrupted global shipping companies, Yang Ming said.
The company has begun to detour around the Cape of Good Hope or divert to the Suez Canal on its Asia-East American route, increasing more than a week at sea per trip, Yang Ming said, adding that it would not sail through the Panama Canal unless the right to access the vital waterway is confirmed.
The Panama Canal Authority, which oversees the waterway, has recently announced a reduction in the number of ships allowed to pass through the canal, from an average of 36 to 38 per day in the past to an expected 18 in February, as well as cut draft levels — how low a vessel can sit in the water — meaning some ships must carry less cargo, Bloomberg News reported.
As a response, global shipping network THE Alliance, of which Yang Ming is a member, is considering corresponding measures such as increasing deployed vessels and alternative routes, including the Suez Canal or the Cape of Good Hope, to ensure schedule stability, it said.
Other members of THE Alliance are Hapag-Lloyd AG, Hyundai Merchant Marine Co and Ocean Network Express Holdings Ltd.
To manage increased costs while ensuring stable service for customers, Yang Ming said it is considering a Panama Canal surcharge, which would be determined through internal discussions within the company and announced to customers separately, it said.
Yang Ming reported a cumulative revenue of NT$119.2 billion (US$3.79 billion) in the first 10 months of this year, down 64.94 percent from NT$339.95 billion during the same period last year, mainly due to the falling freight rates.
Net profit in the first three quarters of the year plunged to NT$6.08 billion from NT$165.86 billion the previous year, company data showed.
Earnings per share were NT$1.74 in the first three quarters, compared with NT$47.5 a year earlier, the data showed.
As of last month, Yang Ming operated a fleet of 93 vessels with a combined capacity of 707,000 twenty-foot-equivalent units (TEUs). Container shipping accounted for 93.3 percent of the company’s overall business, with logistics, bulk shipping and stevedoring comprising the rest, it said.
With the arrival of a low season for shipping companies in the fourth quarter, coupled with an imbalance in supply and demand in the market, freight rates are likely to remain weak, Capital Investment Management Corp (群益投顧) said in a note.
"With both price and volume falling, shipping companies' operations are expected to face pressure again this quarter and Yang Ming’s net profit is estimated to reach NT$88 million with earnings per share of NT$0.03," it said. "Overall, Yang Ming's net profit this year is forecast to fall 96.59 percent to NT$6.17 billion, with earnings per share of NT$1.77."
Looking ahead, the increase in cargo shipments before the Lunar New Year holiday is expected to support a rebound in freight rates in the first quarter of next year, Capital Investment said.
However, due to the decrease in shipping volume, revenue is expected to fall further from the previous quarter and Yang Ming is likely to report a net loss of NT$32 million, it said.
This story has been updated since it was first published to clarify Yang Ming Marine Transport Corp's Panama Canal surcharge remarks and add Capital Investment Management Corp's profit estimates for the company.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
RSS