News / ONE reports 2023 profit collapse due to rates decline, but volumes were up

Photo 185703663 | One Transport © Sheila Fitzgerald | Dreamstime.com

Japanese container line Ocean Network Express (ONE) has provided the first indication of the financial boost from the Red Sea crisis to carriers, as it released its 2023 annual report, which crucially also includes the first quarter of this calendar year.

It said that, while the overall market continued to demonstrate sluggish demand on the key transpacific and Asia-Europe trades, against a backdrop of structural overcapacity stemming from the industry’s massive newbuilding programme, the Red Sea crisis was likely to provide an unexpected earnings bump  that will see the carrier surpass 2023’s profit.

“For the full-year forecast for 2024, profit is expected to be around $1bn, a slight increase on the previous year, as the current economic and geopolitical environment are expected to continue for the time being,” the line said.

CEO Jeremy Nixon added: “We will continue to monitor the situation carefully, focusing on maximising profit by flexible tonnage deployment and efficient equipment control based on demand.”

For full-year 2023, ONE posted revenue of $14.5bn, a 50% reduction on 2022, while EBIT dropped nearly 100%, from $15bn in 2022 to $392m last year.

Almost all of this was due to the freight rate decline last year, as volumes actually improved – it carried just over 12m teu in 2023, an 8% growth on the 11m teu in 2022, while also enjoying a 22% decline in bunker costs.

Fuel consumption was up 16% however, as the extended sailing distances of diverting around the Cape of Good Hope, and increased vessel speeds to maintain schedules, kicked in from December.

In terms of its specific trades, volumes on the eastbound transpacific, which accounts for 31% of the carrier’s business, grew from 2.m teu to 2.5m teu, and vessel utilisation averaged 92%, with capacity management and some later strengthening of volumes towards the end of the year mitigating a weak 82% utilisation level in the first quarter.

“Cargo movements from Asia to North America during January to March increased by 20.5% year on year, thanks to the continued domestic consumption levels in the US,” the annual report said.

“However, the large double-digit increase is mainly due to a backlash from the same period of the previous year.”

On the Asia-Europe trade, which accounts for 21% of its volumes, liftings were flat, at 1.5m teu, with a near-constant 90% utilisation rate.

It said: “Cargo movements from Asia to Europe increased by 11.5% in January and February.

“Prolonged inflation has caused a stagnation in consumer spending, and a tightening of monetary policy led to downward pressure to the economy. As a result, it is expected that a full recovery in cargo movements will take more time.”

As of the end of Q1 24, the carrier’s fleet comprised 235 vessels, for a total capacity of 1.84m teu – according to Alphaliner, around 58% of the fleet is chartered.

It has a further 39 vessels, for 490,000 teu, on order, and there are a further six vessels under construction which ONE will take on long-term charters.