News / High inflation and interest rates, but 'the numbers still add up for box shipping'

© Sheila Fitzgerald |

As manufacturers continue to diversify production to cut dependence on China, it will ensure growth in container shipping, said ONE CEO Jeremy Nixon this week.

Mr Nixon said: “We’re going through weak demand in 2023. In 2022, we had over-ordering [of newbuildings] as a rebound from the 2021 shortages many customers had. Many customers over-ordered in 2022 and now have excess inventory and there is still a lot of overhang.”

In ONE’s last fiscal year, that ended 31 March, the company’s net profit was down 10% year on year, to $15bn and the carrier refrained from predicting its performance for this year, citing a challenging market.

Mr Nixon explained: “Inflation is high and interest rates are high, but if we look at overall numbers, North American numbers of employment are surprisingly good. We think overall container volumes will grow… [there’s been ] 6% CAGR in the last 25 years, but we think there will be growth.”

He said container shipping benefited when China joined the WTO in 2002, leading to “amazing growth in terms of outsourcing”. But 20 years later, Sino-US tensions and Covid-19 have seen manufacturers reducing their reliance on China as a sourcing location.

On what has become known as the ‘China Plus One’ strategy, Mr Nixon said: “So we see this swing of movement out of China, but also increasing outsourcing to South-east Asia, the Indian subcontinent, Africa and South America.

“While the end-product comes out of a different location, the tier-three and tier-four locations that make components to meet new production may not come from the same location, so tonne-mile growth is still strong.”

When asked whether over-ordering of large ships, particularly those over 20,000 teu, in the past two years would limit the upside from this manufacturing shift, Mr Nixon said terminal infrastructure in those countries had improved.

He said ONE had secured 54 newbuildings, mainly in the 12,000-15,000 teu range, through a mixture of direct orders and long-term charters. Twenty had entered service and the rest will be delivered in 2024 to 2026.

“ONE has big ships calling at China and Thailand, Vietnam, India, Indonesia and, increasingly, in the Indian subcontinent; and even moving into Africa and Latin America. This means greater economies of scale to drive down our carbon footprint and get us on our sustainability journey.”