News / ONE eyes network downsize as soft demand sends profits tumbling

The rate of diminishing ocean carrier profitability is accelerating as east-west tradelanes continue to suffer from soft demand resulting in stubbornly low freight rates.

Japanese ocean carrier ONE saw its net profit more than halve to $513m between April and June (its Q1), compared with the first three months of the year.

“East-west routes suffered a fall in demand due to stagnant retail consumption in Europe and the US as a result of high interest rates and inflation,” said ONE.

CEO Jeremy Nixon said it was now “more likely that signs of a strong recovery in orders and inventory rebalancing will not be so apparent until later this year”.

He added” “This will require some early network downsizing adjustments to better manage utilisation levels and schedule performance over the next six months.”

ONE’s result for the quarter was a sharp contrast to the previous year’s record $5.5bn earnings, fuelled by the post-pandemic boom. Top line revenue was $3.77bn, representing a year-on-year 58% drop, and a 19% decline on the previous quarter.

Liftings for the period were 2,825,000 teu, for an average rate of $1,332 per teu, compared with the previous quarter’s $1,788 per teu and the inflated $3,069 average in the same quarter of 2022. However, the carrier’s utilisation rates remained at a healthy 94% on the Asia-Europe headhaul, albeit that load factors were boosted by strong demand on the Asia-Mediterranean route.

Meanwhile, the Asia-North America headhaul services saw utilisation fall, to 82%, in line with the reduction in demand, with ONE’s Asia to North America volumes down 18% year on year, amid much improved vessel turnarounds at previously congested US west coast ports.

Clearly ONE is not going to achieve anywhere near the $15bn profit it produced for its NYK, MOL and K Line shareholders the previous year, and it declined to provide a full-year forecast, citing its expectation of “further shifts in the market…creating an uncertain outlook”.

ONE’s response to the financial headwinds is for more slow-steaming, more blank sailings, the deployment of larger vessels to reduce unit costs – such as the six long-term-chartered 24,000 teu vessels stemmed for delivery this year for Asia-North Europe – and the optimisation of its container fleet by returning surplus leased boxes and more efficient equipment repositioning.

According to Alphaliner data. ONE is the sixth-ranked ocean carrier, in terms of capacity, with a fleet of 218 vessels for a total nominal teu of 1,686,930 teu, and it has an orderbook of 35 ships, for a capacity of 454,268 teu.