Ocean Network Express (ONE), a prominent Japanese-owned shipping carrier, experienced a significant setback in profits during the second quarter of this year. The company’s net income plummeted by a staggering 90%, reporting a mere USD 513 million for the period.
Despite managing to increase liftings by 9% compared to the first quarter, reaching 2.8 million twenty-foot equivalent units (Mteu), ONE’s bottom line suffered from the continuous decline in rates. The carrier’s high exposure to the East-West trades proved to be a major factor contributing to its financial struggles.
The average earnings per twenty-foot equivalent unit (teu) for ONE nosedived to just USD 1,333 in the April-June period, as opposed to USD 1,788 in January-March and USD 3,068 a year earlier. Moreover, cargo movements from Asia to North America during this quarter experienced an 18% year-on-year decline.
ONE operates a substantial 70% of its fleet on the East-West routes, making it one of the largest players in this segment, second only to HMM and Evergreen. Despite facing increased vessel costs due to reduced congestion and fewer blank sailings, the carrier managed to offset the impact with lower bunker and variable costs, primarily related to storage.
For the second quarter, ONE reported a total revenue of USD 3.76 billion and an operating profit (EBIT) of USD 386 million. Unfortunately, this represented a colossal 93% decline compared to the same period in the previous year, amounting to a loss of over USD 5 billion. The carrier’s EBIT margin now stands at a mere 10.3%.
Presenting the dismal results, ONE highlighted the stagnation in demand on the East-West routes, exacerbated by an oversupply of capacity due to reduced port congestion. The company acknowledged that freight levels were subject to short-term fluctuations and refrained from providing a full-year forecast, citing expectations of further market shifts.
In response to the challenging market conditions, Ocean Network Express has outlined a strategic plan to navigate the troubled waters ahead. This includes maintaining flexible blank sailings to adapt to fluctuating demand, expanding port coverage to enhance sales capabilities, and reducing bunker consumption through slow steaming.
The carrier also plans to deploy larger vessels on the East-West trades ahead of schedule and focus on demand-driven service aggregation to improve operational efficiency. Other initiatives include optimizing the container fleet by returning leased boxes and efficiently repositioning them, as well as increasing the sales push for special cargo shipments.
As the shipping industry faces ongoing challenges, ONE remains determined to weather the storm and adapt to changing market dynamics. Only time will tell if their strategic approach will help them stay afloat in these turbulent seas.
Sources: ONE, Alphaliner
