In the third quarter of this year, the average operating margins for the top container carriers witnessed a decline to 1.5%, marking a drop below pre-COVID levels. Notably, the leading Chinese shipping giant, COSCO Group, retained its top position for the second consecutive quarter, boasting an impressive margin of 15.8%. The company’s success is attributed to a robust cost-cutting program that significantly reduced its expenditure, according to sources.
Despite COSCO’s stellar performance, the industry as a whole faced challenges, with revenue plunging by 60% and average rates per twenty-foot equivalent unit (TEU) decreasing by 64%. Strikingly, COSCO could not boost its volumes during this period.
Conversely, US-listed ZIM reported the lowest margin at -16.7%, based on a quarterly adjusted EBIT of -USD 213 million. ZIM’s struggles stem from high rates on its chartered fleet and increased exposure to the spot market, where plummeting freight rates offset gains from volume increases.
Five carriers, including COSCO, Evergreen, Hapag-Lloyd, ONE, and HMM, reported operating profits and positive margins for Q3. However, four carriers, including Maersk (Ocean), Yang Ming, Wan Hai Lines, and ZIM, reported operating losses, indicating potential challenges for the industry.
The positive trend in volumes persisted in Q3 as demand increased, with carriers experiencing an across-the-board lift in liftings compared to both the previous year and Q2. HMM recorded the highest increase at 11% year-on-year, while CMA CGM saw the smallest rise at less than 1%. Despite the minimal increase in liftings, CMA CGM outperformed its competitors in EBITDA.
Looking ahead to Q4, the industry’s average quarterly margin of 1.5% is below the 2019 average return of 2.4% and is expected to decline further. The volatility of earnings in the industry is evident, with the average operating margin being negative in the decade before COVID at -0.2%.
Several carriers that are currently profitable have acknowledged the potential for deficits in the fourth quarter based on full-year earnings forecasts. Earnings guidance for 2023 suggests varying EBIT ranges for Q4, with Maersk Group, Hapag-Lloyd, Ocean Network Express, and ZIM all anticipating challenging financial landscapes.
Sources: Alphaliner
