Maersk Group's downgrading of its 2018 earnings forecast is the latest sign of the darkening broader outlook for the container shipping industry, due to lower-than-expected freight rates, higher bunker prices, and escalating tit-for-tat tariffs.
Maersk said Tuesday that it was lowering expectations for earnings before interest, tax, depreciation, and amortization (EBITDA) from a range of $3.5 to $4.5 billion, from its initial estimate of EBITDA of $4 to $5 billion. Maersk said it still expects a 2018 profit, although it didn't note whether it still expects it to exceed its 2017 profit of $356 million. The largest global container line will release its second quarter earnings Aug. 17.
“We delivered good progress in Q2 [the second quarter] on revenue, volumes and unit cost across our business, and results improved from a weak Q1 [first quarter],” CEO Søren Skou said in a statement. “However, we continue to encounter very high bunker prices, which we have not been able to get fully compensated for in freight rates, leading to an adjustment in our expectations for the full-year 2018.”
Maersk said average bunker prices were up 28 percent in the second quarter compared with the same period a year ago, while average freight rates were 1.2 percent lower year over year. The average cost of bunker fuel in the month of July across the ports of Rotterdam, Shanghai, and New York-New Jersey was $454.42 per metric ton, which is up 51.6 percent from the same month last year, according to IHS Markit data.
Maersk's downgrade comes after OOCL on Monday reported a $10.3 million loss in the first half down from a $53.6 million profit a year earlier, despite a 6 percent jump in total volume, to nearly 3.3 million TEU. The Ocean Network Express in late June reported a $120 million loss in its first quarter, following the merger of the container operations of “K” Line, MOL, and NYK Line.
The container shipping industry earned about $7 billion in 2017, according to Drewry, following six straight years of losses. However, initial forecasts of an encouraging 2018 gave way to a slow start, as rising bunker fuel prices, higher charter/inland costs, and ocean overcapacity concerns have hit first-quarter results.
Hapag-Lloyd warning echoes
Hapag-Lloyd on July 2 lowered its full-year financial outlook — even after being one of the few carriers to report an operating profit for the first quarter. After industrywide profitability in 2017, only three container lines managed to stay in the black during the first quarter of 2018, led by Hapag-Lloyd, which posted operating profits of $66 million on revenue of $3,217 million for a margin of 2.1 percent.
CMA CGM and Wan Hai also managed to turn in positive operating margins of 1.6 percent and 1 percent, respectively. Alphaliner noted that the remaining eight carriers all reported negative margins, with Hyundai Merchant Marine remaining at the bottom of the list for the eighth consecutive quarter with a margin of negative 15.6 percent.
The global container fleet is forecast to increase 5.4 percent this year as container volume rises 5.3 percent, according to IHS Markit's Container Ships Forecast.
But this balance between supply and demand will be undermined by rising bunker prices, declining volume between China and the United States, and growing uncertainty over the impact of widespread US trade tariffs and the retaliatory measures being taken by its trading partners.
Growing trade tensions between China and the United States could undermine that growth this year, although the first half has proven resilient despite the gradual introduction of tariffs between the two countries that have grown to threaten about half of all US imports from China, which amounts to roughly 5.1 million TEU. Chinese retaliation, excluding the $60 billion announced last week as no new analysis is yet available, threatens at least 12.8 percent of US exports to the country.
1 comment:
If you are hunting down a one-keep respond in due order regarding shipping from China to US, we are chipper to help with our regarded organizations. All our organization desires are basically regard driven that remembers us from others. Our organizations are simply planned by exceptional approach that goes for passing on operational enormity to our clients. We connect with them with pragmatic game plans with ensured incredibleness. Despite whether be a little scale business, a medium endeavor or a broad business house, we oblige each one of your needs as the fundamental freight expert community. Keep your business in development with us, your trusted in accessory for transportation and load organizations.
Post a Comment