Box lines post best results in 30 months

12/13/2017

Higher demand saw container lines post markedly improved third-quarter (Q3) earnings, according to analysis by Alphaliner, although falling rates were expected to weigh down the earnings performance of carriers in the fourth quarter.

Out of the 16 leading carriers, 11 reported Q3 results and these revealed an average operating margin of 5%, compared to 2.8% in the second quarter of this year and − 7.8% in the third quarter of 2016.

“The latest quarterly performance was the carriers’ best showing since the first quarter of 2015,” reported Alphaliner. “Apart from HMM, which reported a negative margin of -0.6%, all of the remaining carriers posted positive margins.”

The top Q3 performer was CMA CGM, with operating income reaching $568M on revenue of $5,702m for an operating margin of 10%. Strong volume recoveries were recorded by the French line on the Africa and Latin America trade lanes, which grew by 29% and 16%, respectively. CMA CGM’s Transpacific volumes grew by 17%, although the carrier lost 7% of volumes in the Middle East Gulf and Indian subcontinent trade.

“Last quarter’s results were CMA CGM’s best since the integration of APL’s container business was finalised in June 2016,” said the report. “The results were bolstered by a 11.6% increase in liftings to 4.98m teu, while average revenue increased by 14.4% to $1,144 per teu.

The average performance of the 11 lines to have released Q3 results would have been even higher, according to Alphaliner, if not for the impact of a cyber-attack that hit Maersk at the end of June. This brought the carrier’s third quarter earnings down by over $200m.

“This weighed on Maersk’s performance, as the Danish shipping line was the only one of the main carriers surveyed to have posted a sequential deterioration,” said the report. “In its third quarter, Maersk’s operating margin was 4.1% with operating income of $254m, compared to the 6% margin on income of $364m reported in the second quarter.”

Overall, the improvements recorded by lines were driven mainly by robust demand, with average liftings surging by 10.2% year-on-year in the third quarter, reported Alphaliner. Maersk was again the only carrier to post a sequential, as well as a year-on-year, fall in volumes, due mainly to the cyber-attack that affected liftings for several weeks in July, while all other carriers recorded volume gains.

Cosco led the gainers as its total liftings increased by 23% to reach 5.49m teu in the third quarter, surpassing Maersk’s 5.26m teu to become the largest container carriers in terms of container liftings for the first time.

“Average freight rates showed a smaller improvement, with average CCFI rates edging upwards by 1.9% in the third quarter compared to the second quarter, and by 21% compared to the third quarter last year,” said Alphaliner.

“Individual carriers’ performance was mixed, with marginal rate gains for CMA CGM, OOCL, K Line and Zim while Maersk, Yang Ming and HMM recorded lower average revenue in the third quarter, and Hapag-Lloyd reported flat rate developments, compared to the second quarter.”

Alphaliner said that the inability of lines to drive rates upwards during the seasonally stronger third quarter, despite robust demand growth and continued rate weakness in October and November, would likely weigh down the earnings performance of carriers in the fourth quarter of 2017.

“The average CCFI index has already fallen by 7.4% in the fourth quarter against the third quarter, with further falls expected in the coming weeks,” it added.