Lines return to profit, but rates remain low

11/23/2017

Container lines only saw a “marginal” increase in third-quarter (Q3) peak season freight rates compared to a year earlier, but financial returns for carriers were much improved, according to SeaIntel.

The analyst said although Q3 freight rates were an improvement over the 2016 Q3 peak season, average freight rates remained significantly below those recorded for much of this decade.

However, this did not prevent lines from posting significant year-on-year gains in their financial performances last quarter, with ten of the eleven carriers that have so far published their Q3 results recording a positive EBIT operating profit, with only HMM in the red.

The sector’s performance last quarter compared favourably to Q3 2016 when only Hapag Lloyd and Wan Hai reported positive figures, of $72 million and $10 million, respectively. 

“While Q3 2017 freight rates certainly were an improvement over the horrendous Q3 2016 peak season, the improvement is just marginal, and we are still significantly below the 2011-2014 period, and just barely at the level seen in 2015,” said SeaIntel CEO, Alan Murphy

“The soft freight rates have been driven by low peak season utilisation levels, as carriers have almost completely avoided blanking sailings in 2017. This, in essence, explains why Q3 2017 operational returns severely underperformed carrier expectations, despite the healthy Q3 2017 demand growth.”

Maersk Line, which reported the biggest year-on-year EBIT loss of $456 million in the third quarter of 2016, made the biggest recovery a year later with a positive EBIT of $263 million. COSCO also made a strong recovery, turning an operating loss of $244 million in Q3 2016 into an operating profit of $15 million last quarter.

HMM, which was the only carrier to record an operating loss last quarter of US$26 million, has now recorded operating losses in each of the last four third quarters, including Q3 2017. “However, we should note that HMM have reduced their losses by almost $170 million year-on-year in Q3 2017, from an operating loss of $195 million in Q3 2016,” said SeaIntel.

“It is interesting to note that Hapag Lloyd is the only carrier presenting positive operating results in the third quarters of all eight years from 2010 to 2017. MOL, which posted an operating loss in every third quarter since 2011, recorded an operating profit in Q3 2017, of $19 million, for a year-on-year change of $112 million.”