News / Size not so important: niche carrier Wan Hai holds off Maersk to become the most profitable container line

The operating profits of the majority of ocean carriers sank into the red in Q4 last year, but a wide disparity between the fortunes of the lines has been revealed.

The average EBIT [earnings before interest and tax] in the fourth quarter 2015 of 14 carriers that publish their financial results was a negative 5.9%, compared with a positive 5.2% in the first three months of the year, said Alphaliner.

And the negative trend has continued into 2016, according to new analysis from the industry consultant.

“In the second half of 2015, weak cargo volume growth and a muted peak season demand drove carriers to slash freight rates to non-compensatory levels,” it said.

It noted that after initially boosting the financial performance of the container lines, the benefit from the dramatic fall in bunker prices was rapidly eroded when the carriers “forcibly passed all these cost savings on to shippers through lower freight rates”.

And there is little to suggest that the first three months of 2016 will have proved any better for the carriers – and could even be worse, given that container spot rates touched all-time lows on major trades during the period, which also had a negative impact on new contract rate deals.

However, despite the challenging market, Alphaliner also revealed a wide disparity between the fortunes of carriers in both the good and bad times of last year.

For instance, niche Taiwanese operator Wan Hai was the most profitable container line, based on operating profit margins, at 6.3%; followed by Maersk Line at 6%, CMA CGM at 5.8% and OOCL at 5%.

Wan Hai also remained at the top of the EBIT margin rankings in the difficult fourth quarter, although its operating margin declined to 1.2%.

Interestingly, in the final three months of 2015, Maersk slipped to fifth place in terms of operating profit, producing a negative EBIT margin of 2.3%, behind restructured Israeli carrier Zim, with the second and third slots taken by CMA CGM and Hapag-Lloyd respectively.

OOCL does not publish its quarterly results, but would no doubt have been in the mix towards the top of the fourth quarter EBIT leader board with its track record of continually outperforming its peers.

The continued success of Wan Hai in beating its larger carrier competitors flies in the face of the widely held belief in the industry that it is essential to be big to be profitable – Maersk Line’s turnover in 2015 was $23.7bn, over ten times that of the $2bn of the Taiwanese container line.

Maersk Line’s oft-heralded best-in-market profile has taken a bad knock and this is, arguably, of more concern to its management than the headline-grabbing $165m net loss in the final quarter.

Meanwhile, with the exception of Wan Hai and OOCL, the Asian carriers suffered badly in 2015, noted Alphaliner, having “continued to post dismal results”.

Every place from seventh to 16 in the list was occupied by an Asia carrier, with China Shipping taking bottom place after a loss of $335 on revenues of $5.1bn – an operating margin of -6.5% – although that included a “provision for the impairment of its assets prior to the transfer of its container shipping operations to China COSCO, effective from 1 March 2016”.