Global News Ocean carrier profits to tumble in Q4 slowdown: analyst

After reporting almost $60 billion in net profits in the third quarter, container shipping is set for a steep fall in earnings in Q4, with Alphaliner warning some carriers could see their profits plunge by as much as 70 percent from Q3.

The maritime analyst, in its latest weekly newsletter, pointed to carrier operating profit forecasts for 2022 which, while still highly positive, indicate a significant slowdown in earnings in the fourth quarter.

Alphaliner said average operating margins for the container industry fell for the second consecutive quarter in the July-September period, with the 10 leading carriers reporting across-the-board declines. Those 10 carriers generated an average margin of 51.9 percent for the period, the lowest figure in five quarters, which reflected both a drop in revenue from rapidly falling rates and the impact of rising costs.

Alphaliner noted that of the top 10 carriers, Zim Integrated Shipping Services was set for the largest fall in profits, with its full-year forecast implying operating earnings between $439 million and $739 million in the fourth quarter, down 50 to 70 percent from Q3.

Maersk is on target to report earnings before interest and taxes (EBIT) of $5.2 billion in the last three months of the year, which would be a 45 percent decline compared with the third quarter, Alphaliner noted.

Similarly, Hapag-Lloyd will see EBIT 30 to 60 percent lower than the third quarter, with Ocean Network Express looking at a quarter-on-quarter decline of 45 percent, Alphaliner said. Further earnings decline in store In a container shipping market report released at the weekend, John McCown, founder of Blue Alpha Capital, estimated container carriers made a combined net profit of $58.9 billion in the third quarter, up 22.4 percent year over year. But he noted that when the third quarter was compared sequentially with the second quarter, net income among the carriers reporting financial results was down 6.6 percent..

“The 2Q22 actual results can now be recognized as the peak in terms of earnings,” McCown wrote. “There will be further declines from 3Q22 in quarters to come.”.

With spot rates plummeting, Niels Rasmussen, chief shipping analyst at maritime association BIMCO, told a webinar Wednesday that at the current rate of reduction, rates out of China could soon reach 2019 levels..

Rasmussen noted that the Shanghai Containerized Freight Index (SCFI), which reflects spot market rates out of China, has fallen 49 percent since September and was now 74 percent below its peak of early January 2022..

Rasmussen said the China Containerized Freight Index (CCFI), which is a mix of spot and contract rates, has also continued to fall and is now 40 percent lower than in September, and 54 percent lower than at its peak reached in February 2022. Contract rates start to fall Rate benchmarking platform Xeneta said its data showed long-term rates had begun to fall sharply, especially on the trans-Pacific, as agreements come to an end and new deals were fixed at far lower rates.

After falling 2 percent in September, contract rates from Asia to the US West Coast lost 7.6 percent of their value in October before plunging by 17 percent in November to $4,967 per FEU.

“We’ve already seen how spot rates have collapsed since summer, and after a few months of very slender long-term rates drops, we’re now witnessing a catch-up as existing agreements expire and new contracts come into force,” Patrik Berglund, CEO of Xeneta, noted in a market update Wednesday.

The Asia to North Europe trade has not experienced such a dramatic drop in long-term rates, but the trend is also negative with Xeneta data showing contracted prices falling 1.6 percent in September, 11 percent in October, and remaining flat in November.