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Challenges brewing in liner carrier industry

An economic downturn, coupled with trade volatility and fuel cost challenges will bog down carriers’ earnings in the coming quarters.

In the wake of liner carriers posting mixed financial results for the third quarter of 2018, it appears any benefits to carriers’ earnings in the coming quarters likely will be overshadowed by an array of challenges.

Spot rates are still holding strong year-over-year, especially on routes from Asia to North America, and it seems carriers may be getting better at managing capacity, although newbuilds of over 20,000 TEUs that will continue to be introduced on the Asia-Europe trade over the next few years will pose a threat to the global supply-demand balance.

Additionally, trade uncertainty and dimmer global economic growth projections, coupled with bunker price volatility and added costs carriers will face to comply with the International Maritime Organization’s (IMO) 2020 sulfur cap, will likely put a wrench in their earnings.

For the third quarter of 2018, A.P. Møller – Maersk, CMA CGM Group, COSCO Shipping Holdings, Evergreen Marine Corp. and Hapag-Lloyd all posted a net profit, while Hyundai Merchant Marine (HMM), Yang Ming Marine Transport Corp. and ZIM were all in the red, as illustrated in the chart below, which was constructed using data from the carriers’ financial statements. Currency conversions to U.S. dollars were as of Dec. 10.

Maersk, COSCO and Hapag-Lloyd performed better compared to Q3 2017, with Maersk turning a profit and COSCO and Hapag-Lloyd increasing profits, while CMA CGM, Evergreen, HMM, Yang Ming and ZIM recorded weaker results from Q3 2017.

For the first nine months of 2018, Maersk, CMA CGM, COSCO and Hapag-Lloyd posted a net profit, while Evergreen, HMM, Yang Ming and ZIM recorded losses.

The full article can be read on the site of American Shipper

 

Image credit: American Shipper

Source: American Shipper / Hailey Desormeaux

 

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