ONE or ‘Ocean Network Express’ has apparently recovered from its troubled beginnings. Press reports state that full-year profits for the container shipping line were SG$105m in the financial year 2019 as compared to a loss of $586m in 2018. Revenue is reported to be up 9.1%. The company, which is the sixth-largest container shipping line by capacity, is the result of the merger of the container shipping operations of NYK, MOL and ‘K’ Lines and it had initially suffered from acute integration problems. These seem to be behind it as its results are better than the forecasts of a 2019 profit of around $85m. Yet the immediate prospects for the company now look very different.
Speaking to the press on ONE’s social media, the company’s CEO Jeremy Nixon, countered some of the more apocalyptic perceptions about the state of the container shipping market. He commented that “initially we had a supply shock and we saw very weak sailings after Chinese New Year and now the picture has turned around and the supply side has built-up nicely in Asia…to a situation where we have a demand shock…particularly in Europe and North America. March was not too bad because there was this catch-up going-on trying to replenish inventories but as we come into April we generally we could say that in terms of exports there has been a 15-20% drop-down in exports out of Asia to North America and Europe, imports into Asia have held-up pretty good”. However, he said that “at this stage it is too early to call how June and July goes, or the rest of the calendar year”.
Such unsurprising uncertainty was shared by Rolf Habben Jansen, CEO of Hapag-Lloyd. Speaking to the Wall Street Journal on Monday (4/5/2020) he observed that volumes had been under a lot of pressure and that “this will continue for the coming weeks, and hopefully from the third quarter there will be a slow but steady recovery. But it’s very difficult to predict at this point on whether it will come in July or in September.”
However, Mr Habben Jansen also cautioned that “if a recovery starts in the third quarter, all the top 10 liners will be standing at the end of the year. If it’s going to take longer, then it may become more difficult for some”. This implication does not seem to include Hapag-Lloyd. It, like ONE, has announced respectable results for the past year and its debt burden has lessened considerably. Yet it is an important, if muted, signal that many in the container shipping sector are quietly considering further consolidation. For a company such as ONE, Hapag-Lloyd or many others, further corporate moves cannot be discounted.
SG$ = €0.64/$0.69
Source Transport Intelligence, 07 May 2020
Author: Thomas Cullen