Shipping companies’ earnings fell sharply in the third quarter as freight rates plummeted. The global economic outlook this year is bleak, which has led to market expectations for next year being far below average. According to Alphaliner’s data report, carrier earnings in the third quarter are very worrying. Returns in the third quarter were as low as 1.5%, well below 2019’s 2.4% level. In contrast, before the epidemic, the average profit margin of carriers in the 10 years before 2020 was only -0.2%, and operators are likely to face long-term losses. From a macro perspective, based on the performance of the previous three quarters, the shipping company said that if this economic model continues, the market is likely to suffer losses in the fourth quarter. This is also a normal market fluctuation. Due to holiday sales such as Christmas and Black Friday in the fourth quarter, there should have been a small peak in capacity in the fourth quarter. But the real data is determined by the current economy. For example, this year’s economy is obviously sluggish, so many stages that should have had a small peak have not appeared.
These are all fluctuations in the transport capacity market caused by economic fluctuations. For the fourth quarter, Maersk forecast a loss of between $970 million and $530 million. Likewise, Hapag-Lloyd expects losses to be between $600 million and $400 million. On the other hand, ZIM is undergoing impairment testing with losses of more than US$2 billion, and losses are expected to continue to US$226 million in the last three months of this year. At the same time, shipping companies have made varying degrees of adjustments to their own companies in order to manage shipping capacity more effectively and significantly reduce costs. For ZIM, that means ordering larger, more efficient ships. Unlike those companies in the market that pessimistically believe that it will take about three years, Zim Shipping predicts that the market will turn around next year. The current stage is in the transitional stage. I believe that after this stage, the market demand for transport capacity will gradually pick up next year.
At ZIM, many significant measures are being implemented. The measures include, for example, a rebuilding program with a total of 46 ships, most of which will be delivered by the end of next year to replace less efficient ships that will be taken off-hire in 2024. For new larger ships, they will significantly increase capacity and reduce costs. Zim Shipping said the cost of operating a 15,000TEU LNG ship is the same as operating a 10,000TEU ship. Therefore, under the same cost, as long as the transportation capacity is guaranteed, expenses can be reduced and profits can be increased. As for whether next year’s market will be as predicted by ZIM Shipping, most shipping companies are still waiting to see. For shipping companies, they are likely to face losses in 2024. Even if the market recovers, it remains to be seen whether returns can return to their peak levels. For the majority of consignees, they should actively ship before the market rebounds and monitor market prices in real time to avoid shipping at the highest point and avoid unnecessary losses.
