Throughout the peak of the availability chain crisis, accusations flew, alleging that shipping lines were someway colluding to prop up rates and gouge customers. Recent results posted by ocean carriers undermine those claims. They show the container shipping market behaving the identical way commodity shipping markets at all times have: Rates spike when cargo demand exceeds transport supply, and once the imbalance passes, competition brings rates and utilization back to normal.
Ocean Network Express (ONE), the world’s sixth-largest shipping line, reported its latest quarterly results on Monday (the primary quarter of its fiscal 2023 yr, running from April to June). As with other carriers, ONE’s numbers show a reversion toward pre-pandemic levels, albeit not all the way in which back yet.
ONE reported net income of $513 million, down 91% from the boom-inflated results a yr ago and down 58% in comparison with January-March.
Nonetheless, its bottom line was still significantly better than pre-COVID. In April-June 2019, ONE reported net income of $5 million. In April-June 2018, it lost $120 million.
Rates still above pre-pandemic levels
ONE doesn’t report average freight rates. Moderately, it publishes an index of average quarterly rates (the mix of spot and contract rates) compared to the common for April-June 2018.
This index shows that ONE’s Asia-U.S. rates in essentially the most recent quarter were down 68% from the height in July-September 2022 but were still 22% above rates presently of yr in 2019 and 26% above 2018 levels.
ONE’s average Asia-Europe rates in April-June were down 75% from the high in January-March 2022 but still 39% above each 2018 and 2019 levels.
“Long-term contract freight rates fell sharply in each North America and Europe in comparison with [January-March] and the identical period last yr, pulled down by short-term freight rates,” explained ONE.
The dissipation of port congestion added vessel supply at the identical time transport demand suffered as a result of “lack of progress in clearing inventories.”
ONE’s utilization level within the Asia-U.S. trade fell to 82% in April-June. Throughout the COVID-era boom, it hovered around 100%. Its utilization rate in April-June 2019 was 86%.
Uncertainties cloud outlook
“Further shifts out there are expected as transport demand and trade patterns proceed to change, creating an uncertain outlook, which is difficult to predict,” said ONE. “Under these circumstances, it is incredibly difficult to announce an inexpensive business forecast presently and the full-year forecast for FY 2023 is yet to be determined.”
ONE said that it should proceed to “blank” (cancel) sailings in response to changing demand.
Other sources of market information point to green shoots within the trans-Pacific trade that would support sequentially higher utilization and spot rates in the present quarter. There have been multiple reports of increased blank sailings and higher capability management within the trans-Pacific, supporting rates in July.
Analytics group Platts said Monday that demand is slowly picking up as inventory overhangs are clearing and a few importers are actually moving to replenish stocks. Several market participants told Platts that they expect the carriers’ next general rate increase, scheduled for Tuesday, to push pricing higher.
The Drewry World Container Index (WCI) shows 4 straight weeks of spot rate gains within the trans-Pacific. The WCI Shanghai-Los Angeles assessment for the week ending Thursday was $2,087 per forty-foot equivalent unit, up 32% from late June and up 42% from levels presently in 2019.
The WCI Shanghai-Los Angeles assessment got here in at $3,049 per FEU, up 22% since late June and up 12% versus 2019.
The post Shipping line ONE’s profits plunge but still top pre-COVID levels appeared first on FreightWaves.