The performance of container lines in the fi rst quarter and the expected trends of the industry in the future

By Xu Jianhua

The performance of container lines in the fi rst quarter and the expected trends of the industry in the future

By Xu Jianhua

Maersk Line posted a net loss of 66 million US dollars in the first quarter while it had posted a net prof i t of 32 million US dollars in the same period last year. Soren Skou is full of conf i dence for the prospect of the market recovery, and believed that there is no doubt about the recovery of container market. As the market fundamentals continue to improve and tariff increases, the performance of Maersk Line is expected to be enhanced in the second quarter.

In the first quarter of 2017, CMA CGM continued its good performance following the second half of 2016.The net prof i t of CMA CGM, including APL, is expected to be 86 million US dollars in the fi rst quarter of this year while it recorded a loss of 100 million US dollars last year. It can be seen that though the APL was acquired by CMA CGM less than a year ago, APL has made a prof i t instead of suffering a loss in the fi rst quarter and the synergistic effect of integration is gradually emerging.

In the first quarter of 2017, COSCO SHIPPING Lines’operating income and freight rates increased signif i cantly. The Asia-Europe route business leads the performance with freight volume of more than 1 million TEU, an year-on-year increase of 60.5%; freight income of 697 million US dollars, an year-on-year increase of 97.3% .

In the first quarter of 2017, Hapag-Lloyd posted a loss of $ 66 million while the loss was $ 47 million in the same period last year. It is noteworthy that the Group's $ 66 million loss this quarter was just the same as the loss announced by Maersk Line in May 11, but the container volume of Maersk Line was 260.1 million TEU, far more than Hapag-Lloyd 's 193.4 million TEU. Despite the rise in fuel prices this quarter, the Hapag-Lloyd continued to report losses, but in the performance report the company still stated that the operation is in good condition.

The latest data from Xeneta, a market informationinstitution shows that the long-term contract tariffs for the Asia-Europe route negotiated over the past three months were 2.2 times of last year’s average tariff. At the same time, the tariff of the second quarter is 10% higher than that of the first quarter. Specifically, in mid-May, the average long-term contract tariffs from major ports in China to major European ports reached $ 1396 / FEU which is 120% higher than that of the same period last year. Moreover, the North-South routes tariffs are also rapidly being restored which may catch up with east-west trunk routes.

The container shipping industry which has just experienced one of the worst years of in history in 2016 is now in the process of recovery. Drewry shipping consultancy firm predicts that in 2017 both tariffs for east-west freight or global trade will continue to go up, and many carriers will therefore make a profit instead of suffering a loss. East to east trunk freight tariff will increase by 14% and the global tariff will increase by 11% to 12%. Drewry has full conf i dence that the market has turned the corner, the carrier once again has the right of speech to set tariff.

According to Alphaliner's data, the recovery of the shipping market is conclusive. As the year-on-year growth of shipping capacity and demand are respectively 1% and 4%～5%, so the supply capacity and demand equation is signif i cantly improved and the upward trend in tariffs in the fi rst quarter will continue.

The latest forecast report from BIMCO said that the balance equation of capacity and demand of container shipping is developing toward the direction of favoring the carriers, but the performance of three major alliances in the east-west main route in 2017 will be the mostsignif i cant factor.

If measured by TEU miles, 57% of the world's transportation needs are generated in non-East-West trade. However, due to the recent increase in the size of the ship caused by the cascade replacement, two echelons are formed in these non-main trade routes. However, the three major alliances do not have the initiative in the nonmain routes.

Research results from Drewry are slightly different, but consistent with BIMCO in terms of the trends of shipping demand exceeding supply. The report said that shipping capacity growth in 2016 was 2.2%, of which most were realized in the fourth quarter, because the bankruptcy of Hanjin Shipping in August of that year hindered the growth in freight demand. The report said that the growth rate of capacity demand in 2017 will certainly exceed that of last year.

According to the estimation of BIMCO, the current global order capacity is about 3 million TEU and 86% of which will be delivered in 2017 and 2018. But almost no company will give new orders. There are only 250,000 TEU new orders in 2016, and almost none from January to April this year, and it is expected that the trend will continue.

The report from BIMCO shows that the container shipping industry will continue to optimize the network and improve its eff i ciency. Liner companies will take all feasible measures to cut costs and share aff i liate bonuses.

BIMCO estimated that the Alliance 2M, OCEAN and THE have controlled a total of 77% of the world's shipping capacity and 96% of that in east-west main route.