London, UK – According to a review of second-quarter carrier results by Drewry, container lines have enjoyed their most profitable quarter in two years and are looking at a upswing in profitability
With the exception of CMA CGM, which will report later this week, all carriers which publish their financial results have now posted their interim first-half numbers.
“Our preliminary operating margin estimate is that during second quarter of 2017 the industry enjoyed its most profitable quarter in two years, with margins hitting around 4%,” said Drewry in its Container Insight Weekly.
“The trend line is undeniable, and keeps the industry on track to meet our forecast that it will make a collective operating profit in the region of $5 billion this year, after losing a similar amount in 2016.”
Of the 16 container lines analyzed by Drewry, only four were still operating in the red at the halfway point this year, compared with 12 in that position last year.
The consultant suggested there were three main reasons for the turnaround in fortunes this year: “a shrinking pool of competitors”; “improving supply and demand fundamentals”; and most important “carriers (in general) used this newfound pricing power to good effect”.
The data shows the emphasis had shifted from market share growth to improving returns. But there was one notable exception: Hyundai Merchant Marine (HMM) found itself bottom of the pile with a first-half loss in H1 of $227 million, although this was an improvement on the $353 million loss in the first six months of last year.
Drewry said HMM had offered “steep discounts on freight rates to recover lost volumes”, the consequence of the South Korean carrier’s desperate financial situation prior to its creditor-led restructuring last year. While HMM had grown its carryings by 46% in the second quarter, year on year, its revenue per unit had declined by 6%.
Drewry’s view on the cumulative first-half carrier margins, which it said were likely to go “even higher” when CMA CGM reports its results, was positive.
“Even greater pricing discipline should prevail as more lines emerge from their own troughs,” it said, adding that in combination with an improved market outlook and fewer players, “should ensure the recovery is more sustainable than before”.