News / Zim goes for growth with bigger newbuilds, but will need to fill them

Israeli carrier Zim says it needs to “capture volume” as it takes delivery of 46 long-term chartered vessels and continues to pay high daily hire rates for tonnage it already has on hire.

The carrier said it would be in a “transition period” until 2025, during which it will redeliver 34 “expensive Covid-era chartered”vessels next year and 40 the year after.

In the interim, Zim has been active in the charter market, re-letting some of its surplus tonnage – albeit at daily hire rates below its charter party commitments.

Meanwhile, its third-quarter revenue plunged by 61%, compared with the same period last year, to $1.3bn, from liftings of 867,000 teu, which was 3% higher, for an average rate of $1,139 per teu. This produced an ebit loss of $213m for the period, and an operational loss of $373m for the nine months.

However, Zim’s net Q3 result was impacted by $2.1bn impairment write-down, resulting in the carrier’s net income being recorded as a $2.3bn loss. And it’s outlook for the full year is for an ebit loss of between $400m and $600m, meaning it expects Q4 to result in an ebit loss of up to $227m.

President and CEO Eli Glickman said the carrier’s Q3 results “reflected the current operating environment, as demand remained weak and freight rates continued to deteriorate”. He added: “Given our negative outlook for freight rates in the near future, we recorded a non-cash impairment loss of approximately $2.1bn.”

He explained: “We are currently in a transition period, which we expect will extend into 2024,” adding that Zim’s fleet renewal programme, which includes 28 LNG-powered vessels, was expected to “improve our cost structure and drive long-term profitability growth”.

And CFO Xavier Destriau also told analysts during the Q3 earnings call he did not expect much improvement in the outlook for 2024.

“…going into 2024, very little will change in the sense that the freight rates today are at a very low level and very challenging for the industry, and we don’t see any catalyst for that to change in the immediate future… the excess supply seems to be here to stay for a while, therefore reducing the optimism for rates to meaningfully recover,” he said.

“We are taking a very cautious view of the coming quarters, including full-year 2024,” he added.

Nevertheless, Zim still has around $3bn on its balance sheet, which will enable the carrier to ride out the downturn, but Mr Destriau warned that, “with clouds on the horizon, we have to be very mindful of our liquidity position”.

According to Alphaliner data, Zim is the 10^th-ranked biggest carrier, in terms of capacity, with a fleet of 124 ships, of which 116 are chartered-in, for a capacity of 584,355 teu. It also has an orderbook for 33 long-term chartered vessels ,with capacity of 258,576 teu.

Mr Destriau said Zim would resume the ZEX China to US west coast loop it suspended in March, partly due to the trending US shift recovery from east to west coast ports as a consequence of the Panama Canal draught restrictions. Moreover, the ZEX loop will enable Zim to redeploy six surplus panamax ships.

The CFO added that, by the end of next year, Zim’s fleet capacity would have increased to around 700,000 teu, due to larger ships replacing those on existing charters, as part of its fleet renewal programme.

“This is clearly something that is important to us when we look into 2024 and the volume we need to capture, in terms of filling those vessels,” said Mr Destriau.