Asia-Europe carriers revise FAK rates in fight to rein in revenue erosion
While container spot rates on the transpacific are falling steadily week on week, the decline ...
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By Mike Wackett
Zim’s return to the black in Q2, the carrier’s first net profit since Q317, confirms a trend of container lines giving up their chase for market share in favour of profitability, according to analyst Lars Jensen.
“Zim has followed the path of trading lower market share for improved yield,” he said.
The Israeli carrier posted a Q2 net profit of $5m, despite a year-on-year volume decrease of 5.3%. But its liftings consisted of better-paying cargo, evidenced by average rates per teu jumping 9.5%.
“The results from Zim reaffirm a trend we have been seeing from a number of carriers. In a low-growth market, possibly verging on recession, this is an eminently sensible approach,” said Mr Jensen.
He added that Zim attributing its recovery in part to its extended cooperation with the 2M alliance was also significant.
“It underscores the development in the deepsea markets that , to be successful in these commoditised trades, you must have scale – not just in terms of vessel size, but also in frequency.”
With the Q2/H1 reporting season almost complete, with only CMA CGM and Cosco of the carriers that report their results still to come, there are signs that carriers are indeed adopting a “more sensible approach” in their growth strategies.
“The real litmus test for all the carriers pursuing this approach,” said Mr Jensen, “will be whether they are able to maintain capacity discipline in the face of negative volume development when a recession hits. Will they pull out vessels sufficiently quickly to prevent a sharp drop in rates?”
Meanwhile, commenting on the Zim results, Alphaliner noted that despite the return to profitability, the carrier’s shareholder equity remained in deficit to the tune of $256m at the end of June.
“Since 2018, Zim has recorded cumulative net losses of $2.59bn,” added the consultant.
Comment on this article
Gary Ferrulli
August 29, 2019 at 2:59 pmThe last point on what the carriers do if a global recession hits, hopefully the carrier
management can recall what they did in late-2009 and throughout 2010. They anchored over 600 vessels and went from losing $21. Billion in 2009 to making $8. Billion in 2010. There is a significant clue on what to do just in case they don’t have the memories.