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With 13 major ocean carriers having reported their first-quarter results, boosted by a 49% fall in fuel prices and foreign exchange gains from an appreciating US dollar, consultant Alphaliner believes the high profits recorded in the period will only serve to fuel the freight rate war.

Alphaliner calculates that average operating profit margins (OPM) improved significantly in the first three months, compared with the same period of 2014: the industry averaged an OPM of 5%, a great improvement on the negative 1.3% of the year before.

Once again Taiwanese niche carrier Wan Hai outscored Maersk Line – recording an impressive 14% OPM, compared with the Danish line’s 11.7% and third-best CMA CGM’s 10.1%.

Alphaliner’s OPM league table was propped up by Japan’s MOL with a negative 1.6% and Singapore-based APL’s marginal 0.8%.

The analyst noted that several carriers were able to post their best first-quarter results on record, but argued that the subsequent decline in freight rates, combined with an 11% quarter-on-quarter increase in bunker prices since, meant that carrier earnings were once again coming under pressure.

And this, said Alphaliner, was being exacerbated by weak demand growth, “especially in the key Asia-Europe market, as well as in the South America, Africa and Australia-related trades”.

It believes carriers will also be hampered by significant capacity hikes in the three main tradelanes where demand growth has been relatively strong so far this year: Asia-US east coast,  and transatlantic and intra-Asia routes.

With a rate war in full swing on the all important Asia-Europe trades, extracting good returns from other routes becomes more important as compensation for periods of marginal or sub-economic voyages on the blue chip route.

Meanwhile, many Asia-North Europe carriers have announced 1 June general rate increases (GRIs) – yet another attempt to propel rates higher before the peak season. Yesterday, Maersk announced a 1 June increase of $800 per teu on Asia-North Europe and $600 per teu on Asia-Mediterranean.

However, recent history suggests that the life span of these ambitious GRIs is becoming shorter and shorter – the $581 per teu GRI-induced gain on the Shanghai Containerized Freight Index registered on 8 May nearly halved just a week later.

The negative outlook following a good first quarter for ocean carriers has prompted more rumours concerning the underperforming APL, with a number of potential buyers being suggested in the halls of shipping networking events. Profitable Hong Kong-headquartered carrier OOCL has for some time been the favourite of the speculators, but candidates now being put forward include Maersk.

Maersk Line grew by acquisition to become the world’s largest container carrier, but following considerable indigestion caused by its purchase of P&O Nedlloyd in 2005, just six years after its takeover of Sealand, it has shown little interest in any further M&A activity.

In any event, argues Alphaliner, there has been no formal indication that APL is actually up for sale.

Temasek Holdings, the government of Singapore’s investment arm and a 67% controlling shareholder of APL parent NOL, would, said Alphaliner, be “unlikely to sell NOL’s only remaining asset at a distressed price” – although this is likely to be the only reason interested buyers with deep enough pockets might be tempted to make a bid.

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