Container Shipping Industry Faces First Negative Operating Margins Since 2018

Container Shipping Industry Faces First Negative Operating Margins Since 2018

The container shipping industry has witnessed a significant downturn, with average operating margins plunging into negative territory for the first time since 2018. According to recent reports, the average operating margins for the leading container carriers dipped below zero to an estimated -3% in the final quarter of 2023, marking the industry’s first negative result in five years, according to Alphaliner.



During the last three months of the year, six out of nine carriers reported operating losses, including prominent lines like Hapag-Lloyd and ONE, which experienced operating losses for the first time. Despite this, Evergreen Marine Corp emerged as a frontrunner, achieving a 7.0% margin, alongside South Korea’s HMM, which narrowly avoided a loss with a slim container operating profit margin of 0.7%.

China’s COSCO Group is anticipated to report positive margins for the quarter, following a significant cost-cutting program that improved expenses, though full results are expected in ten days.

While the carriers’ average margin remained positive for the year at around +4%, ZIM, Yang Ming, and Wan Hai Lines reported operating losses for the full year, indicating a faster-than-expected slide into deficit. Maersk, the world’s second-largest carrier, reported a low margin of -12.8% for the fourth quarter but remained positive for the year with a margin of 6.6%. However, the company released a bleak outlook for 2024, indicating potential operating losses of up to -USD 5 billion.

Factors contributing to the decline in earnings included rate declines throughout the year, outweighing volume gains. Better-performing carriers like CMA CGM and Hapag-Lloyd saw slight volume increases but recorded significant year-on-year rate declines. Additionally, carriers with exposure to Latin American and African markets experienced less severe rate drops during the year.

Looking ahead, the container shipping industry faces uncertainty, with wide-ranging forecasts for 2024 earnings. Hapag-Lloyd CEO Rolf Habben Jansen expressed hope for a normalization of the Red Sea shipping crisis, while ZIM predicted a strong first half of the year but anticipated weaker rates in the second half.

The latest quarterly margin results have taken carriers back to levels last observed in early 2018, indicating a challenging period for the industry. Unlike the synchronized increase in earnings during the pandemic, the current downturn has shown significant variations between quarters and individual carriers. As uncertainties persist, the container shipping industry braces for potential challenges ahead.

Source: Alphaliner

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