News / Singamas warns investors it's in for a bumpy ride as demand for new containers slumps

Container manufacturer Singamas yesterday issued a profit warning to the Hong Kong Stock Exchange.

The Chinese firm blamed declining global demand for ocean freight transport and consolidation among its principal customers.

The company, the world’s second-largest box maker after CIMC, warned investors it would post a loss of US$25m for the first six months of this year. This compares with a a $10m profit at the same point last year, but that was followed by a $2.7m loss for full-year 2015.

Singamas also said it continued to be affected by the fall-out from the Tianjin explosion, with compensation payments still outstanding.

Meanwhile, the global drop in steel prices – mainly due to the chronic overcapacity of Chinese production and flat demand – has also affected Singamas revenues, as prices of new containers have plummeted

“Sluggish global economic conditions continue to affect world trade and exports from the People’s Republic of China,” said the firm. “This in turn affected demand for, and the average selling price of, new dry freight containers.”

According to Drewry’s annual Container Equipment Insight, published last month, in the first quarter of this year the cost of a new 20ft dry freight container fell to its lowest level since 2002 – averaging $1,350, down from around $1,850 a year ago.

And Singamas is also likely to see fewer customers as consolidation takes place among carriers and box leasing companies, with the considerable capital expenditure involved in takeovers dampening the appetite to invest in new containers.

The company warned investors: “Lower business volumes as well as low average selling prices significantly affected the group’s overall profitability in the first half of 2016.

“The market uncertainty is expected to continue in the second half of 2016.”