Container shipping lines recorded a marked improvement in profitability in the second quarter (Q2), with most of the top 12 global carriers profitable in Q2.
Analysing the latest financials from 12 leading global carriers, SeaIntel said the results revealed a considerably “more positive picture than the horrendous second quarter of 2016”.
Ten carriers posted profits in Q2 2017, with only two – HMM and MOL – recording losses. HMM posted a loss of $81.8 million USD for 2017-Q2, having posted losses in six of the past eight second quarters, while MOL reported a loss of $55.1 million in the period and has now recorded losses in the past seven second quarters.
“On the other hand, despite the revenue and volume loss from the cyber-security incident, we see an outstanding financial result from Maersk Line in 2017-Q2, recording EBIT of $376 million, more than three times the segment profit of second-best performing COSCO at $122 million,” said a note from SeaIntel shipping analyst Imaad Asad. “The remaining eight carriers all had 2017-Q2 operating profits of less than $100 million.”
COSCO showed the strongest revenue growth, with a 47.3% year-on-year revenue increase in 2017-Q2. However, Asad said the carrier’s improvement was “misleading” when compared to the results of rival carriers “due to the integration of CSCL in 2016-Q1”.
Evergreen and HMM followed COSCO, reporting the second and third-largest year-on-year revenue increases, of 30.3% and 30.1%, respectively.
“Maersk Line, Hapag-Lloyd, OOCL, Yang Ming, and ZIM all saw their revenues grow 20-25% year-on-year in the second quarter, and much of this revenue growth is likely to be a consequence of the Hanjin bankruptcy, as the Korean carrier was still in operation in 2016-Q2,” said the note. “The remaining four carriers, Wan Hai and the three Japanese carriers, all saw much lower revenue growth of around 10% year-on-year.”
SeaIntel said all 12 carriers had improved their Q2 profits/loss situation in 2017 over 2016 with Maersk Line reporting the greatest net improvement, turning a $123 million loss into a $376 million EBIT profit.
“COSCO has seen the second-best profit improvement over 2016-Q2, at $381m,” said the note. “The remaining carriers have all seen an improvement of less than $200 million.
“Interestingly, Wan Hai, the only carrier to consistently have made a profit in every second quarter for the past six years, is the carrier that has seen the smallest improvement, of just $18 million, in 2017- Q2.”
In a separate note from Drewry Maritime Financial Research, the analyst said that Hapag Lloyd (HL)’s revenue increase of 28% year-on-year in 2Q2017 included €199 million of revenue contributions from UASC, which completed its merger with HL on 24 May.
Drewry also noted that HL’s volume in the quarter was reported at 2.3m teu, and its revenue per teu came in at $1,064/teu – up 21% and 4% year-on-year, respectively. “On a standalone basis, HL’s volume growth of 8% year-on-year was the highest among major operators,” said Drewry.
“Pricing too was up by 7% and stood at US$1,087/teu for the quarter.”
Drewry said HL’s bargaining power had improved significantly due to its membership of The Alliance, which started operations on 1 April and this would help its financial performance over the rest of the year.
“This new alliance, along with the increased level of consolidation more generally seen in the industry, has returned the bargaining power to the liner operators,” said Drewry.
“We hear that, whereas last year, many shippers would decrease their contracted volume – say to 75-80% – and ship more on the spot market to take advantage of lower rates, this year, more shippers are increasing their contracted volumes again to secure rates, space and create some consistency.
“Also, HL has a series of rate hikes planned, particularly on the East-West trade routes later this year. While all of the hikes might not stick, we expect that some will, and prove to be a positive catalyst for the company.”