[SINGAPORE] The average earnings margins for the liner businesses of major ocean shipping companies fell to 8.4 per cent in the quarter to June, as declining freight rates and rising operating costs hit profitability.
Data provider Linerlytica expects these carriers’ earnings before interest and tax (Ebit) margins in the next two quarters to further erode, pushing their profitability into negative territory.
Of the 11 liners that Linerlytica tracked, the Ebit margins of the top and bottom performers in the quarter were, respectively, 0.9 per cent for Ocean Network Express (ONE) and 24.2 per cent for Wan Hai.
ONE’s barely break-even margin was due to accelerating operating costs, noted Tan Hua Joo, container industry analyst at Linerlytica.
He added: “Maersk and Hapag-Lloyd remained at the bottom quartile, with the launch of the Gemini Cooperation network in February doing little to lift the two partners’ competitiveness vis-a-vis their main rivals.”
These European liners continued to underperform their Asian peers, he said, with the top five performers all being Asian operators. They are Wan Hai, Orient Overseas Container Line (17.3 per cent), Evergreen Marine (16.7 per cent), Cosco Shipping (12.23 per cent) and Yang Ming (10.3 per cent).
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Israel liner Zim’s Ebit margin was 9.1 per cent, putting it in sixth place. South Korea’s HMM and French carrier CMA CGM both posted a margin of 8.6 per cent each.
Hapag-Lloyd recorded an Ebit margin of 3.2 per cent, while the German carrier’s Danish partner Maersk logged 2.7 per cent, Linerlytica data indicated.
Freight rates, meanwhile, dipped for 11 weeks straight, Drewry’s World Container Index showed. The maritime and shipping research and consultancy provider expects rates to descend further, as supply continues to outstrip demand.
Drewry said: “The volatility and timing of rate changes will depend on (US President Donald) Trump’s future tariffs, and on capacity changes related to the introduction of US penalties on Chinese ships, which are uncertain.”
While the Shanghai Containerized Freight Index logged its first increase after 11 weeks of declines, Linerlytica believes that the rise would not be sustainable in the absence of capacity cuts by carriers.
