Carriers are benefiting from lower oil prices, but face capacity overhang.
A half dozen shipping companies reported results for the final quarter of 2014 or most recent nine month period on Friday, and presented a mixed picture.
Several said they were benefiting from lower fuel prices and expressed optimism going forward based on the stronger U.S. economy and quantitative easing actions taken by the European Central Bank.
But they also reported a challenging environment.
For example, Japan largest shipping company, NYK, noted “Marine cargo movement increased on the whole in the
shipping industry, and although unit costs for fuel oil fell in
association with the decrease in oil prices, the deep-rooted pressure on
supply capacity remained, mainly in container and dry-bulker vessels,
and the severe business environment continued.”
NYK also noted congestion at U.S. ports on the West Coast resulted in increased costs.
Korea’s Hanjin said an improvement in the operating result of its container unit came about from “cost saving measures such as active rate restoration efforts and rationalization of service network. Continuous fall of oil prices have also helped reducing fuel prices.”
NYK added that in the last nine months of the year “consumption in the US transitioned steadily due to recovery in employment and housing markets, and favorable conditions continued. We observed some signs of expansion in exports and improvement in capital investment in Europe; however, the risk of deflation still remains and the uncertain economic environment continued.
“China maintained stable growth rates despite seeing slowing in capital investment. While we saw aspects of temporary setback in the Japanese economy following the increase in consumption tax, we also saw signs of recovery as a result of factors including the sudden weakness in the yen from October onward,” said NYK.
Some highlights from their reports:
Hanjin. Korea’s Hanjin Shipping reported a 10 percent drop in sales and a another money losing year, but noted it had an operating profit in 2014 after continuous losses since 2011.
The company said the loss was “a result of supply decrease due to disposition of inefficient vessels.”
Hanjin said in the fourth quarter it moved 1,153,037 TEU, 3.7 percent fewer than it did in the same 2013 period.
The company’s container business unit had revenue of just over 2 trillion South Korean won ($1.8 billion) in the fourth quarter 2014, 1 percent more than in the fourth quarter of 2013. The container business unit had an operating profit of 64.4 billion won, a turnaround from a 125 billion won loss in the fourth quarter of 2013.
Including the company’s bulk and other operations, Hanjin had a net loss of 38.9 billion won in the fourth quarter, a much smaller loss than the 247 billion won loss it reported in the fourth quarter of 2013.
In 2014, Hanjin moved 4,552,885 TEU, 4.1 fewer than in 2013. Container revenue in 2014 was 7.8 trillion won, 7.5 percent less than in 2013. But operating profit for the container business unit was 143.5 billion won, a turnaround from 2013 when the container business had a loss of 316.9 billion won.
Including all business units, Hanjin lost 423 billion won in 2014. That loss was smaller than the 680 billion won loss in 2013.
Looking ahead, Hanjin said with continued growth in the U.S. and the positive influence of quantitative easing by the European Central Bank, the “container shipping market is likely to stabilize.” It added that “cost structure improvement measures have secured our cost competitiveness and together with falling oil prices, it is likely that our figures improve continuously.”
OOCL. Orient Overseas (International) Ltd., the Hong Kong based parent of OOCL, said that it moved more containers and had higher revenues in 2014 despite downturns in the fourth quarter. The company only reported operational results containing information on volumes and revenues, not a full financial report.
In
the fourth quarter of 2014, OOCL moved 1,359,946 TEU 2.6 fewer
than in the same period last year. Volumes were down 0.8 percent in the
transpacific, 5.1 percent in the transatlantic and 7.2 percent in the
intra-Asia and Australasia trades, but up 12.1 percent between Asia and
Europe.
Revenue was $1.4 billion in the fourth quarter, down just
0.2 percent from the same 2013 period. Revenue was down in all trades
except Asia-Europe and the transpacific.
In the fourth
quarter, the company said its loadable capacity decreased by 1.3
percent, and that its overall load factor was 1 percent lower than in
2013. Average revenue per TEU was 2.5 percent higher than it was in the
fourth quarter of 2013.
For the full year, OOCL moved 5,585,516 TEUs, a 5.5 percent increase.
Revenue was $5.8 billion in 2014, 3.5 percent more than in 2013.
The company said OOCL’s loadable capacity increased by 1.4 percent
during 2014 and that the overall load factor was 3 percent higher than
it was in 2013.
Overall average revenue per TEU in 2014 was 1.9 percent lower in 2014 than it was in 2013.
The three Japanese carriers, all of which operate on a fiscal year that operates from April 1 to March 31, reported nine month results on Friday.
NYK. The largest Japanese shipping company, NYK, said it had revenue of 1.78 trillion yen ($16.85 billion), in the nine months ending December 31, 2014 up from 1.65 yen trillion revenue in the first nine months of the prior fiscal year. In the same period, net income was up slightly to 28.46 billion yen ($269 million) compared with 28.39 billion yen.
NYK’s business is highly diversified, including operations in bulk shipping, logistics, air cargo operations, cruises and real estate.
But NYK said revenue in the liner trade was 515.4 billion yen in the nine months ending December 31, up 12.4 percent from the same 2013 period. The company had a recurring profit from the liner segment of 6 billion yen in the nine months ending December 31, up from 300 million yen in the same 2013 period.
NYK said “In the container shipping division, although overall cargo movement increased, mainly on European routes, market conditions remained weak due to strong pressure of supply on the back of completion and deployment of the new ultra large container ships.
“On transpacific routes, thanks to favorable U.S. economy, demand capacity transitioned steadily, it resulted in comparatively favorable freight rate. However, additional expenses were caused by unexpected reducing assignment and shortage of tonnage as an impact of port congestion in the West Coast of North America.”
It noted that the G6 alliance has expanded its collaboration in the transpacific to the U.S. West Coast and in the transatlantic and that it has also realigned Asian routes to improve the competitiveness of services.
“In regard to the cost structure, NYK Line strove to reduce fleet and operational costs through such measures as returning unprofitable vessels, refitting vessels to improve fuel efficiency, and deploying highly fuel efficient vessels. Thorough measures were taken to efficiently assign vessels and optimally operate the fleet to prevent unnecessary costs.”
These measures included the deployment of larger vessels to raise shipping efficiency, assigning vessels to match the attributes of each type of service, and effectively utilizing surplus vessels and charter ships to reduce schedule delays. Additionally, efforts were made to further reduce costs and raise gross profit by expanding EAGLE (a yield management program to reduce costs and maximize profit through efficient container operations) from North America to European and Latin American routes.
NYK said in its terminal business, total handling volumes in and outside Japan increased year on year.
MOL. MOL had revenue in the first nine months of its fiscal year ending December 31, 2014 of 1.34 trillion yen ($11.16 billion) compared with 1.28 trillion yen in the same 2013 period.
Profit in the first nine months of its current fiscal year was 24.9 billion yen ($206 million) compared with 29.5 billion yen.
In its container business, MOL said it tried to reduce operating costs by continuing to slow steam ships and reorganize routes, but that it recorded a loss of about 21 billion yen in the first nine months of the current fiscal year compared with an 11 billion yen loss in the same 2013 period.
Container revenues, however, increased to 587 billion yen in the first nine months of the current fiscal year compared with 534 billion yen in the same period in 2013.
MOL said cargo volumes and freight rates from Asia to North American and Asia to Europe were comparatively firm. But back haul volumes from Europe and the U.S. to China and other Asian countries “showed weak growth” and freight rates were stagnant.
MOL also noted the on the U.S. West Coast “cargo handling efficiency was lowered by a labor slowdown.” The slowdown “caused severe vessel congestion and forced us to review our operation plans,” according to the liner company.
On North-South container routes, MOL said freight rates “continued to struggle due to widening of the gap between supply and demand resulting from allocations of large vessels particularly to the South American east coast route.”
In the intra-Asia market, MOL said rates and cargo volumes “were underpinned by strong demand” and were comparatively stable. But there it also said “vessel congestion at various ports in Asia stayed unresolved, and the adverse effect from delay of vessels’ schedule remained.”
“K” Line. “K” Line had revenue in the first nine months of its fiscal year ending December 31, 2014 of 1.02 trillion yen ($8.4 billion) compared with 918 billion yen in the same 2013 period.
Profit in the first nine months of its current fiscal year was 33 billion yen ($273 million) compared with 15.7 billion yen last year.
“K” Line said its container segment had an 18.2 billion yen profit in the first nine months of its current fiscal year compared with a 1.1 billion yen loss in the same 2013 period.
Container revenue was higher in the nine months ending December 31, 2014, at 503.8 billion yen compared with 436.4 billion yen in the same 2013 period.
“K” Line said in the nine month period cargo volume was up 5 percent year-over-year, including a 7 percent increase on the Asia-North America trade and a 9 percent increase on Asia-Europe routes.
Volumes were down 4 percent on North-South and intra-Asia services.
“K” Line said freight rates improved in 2014 “due mainly to relatively stable market activities on East-West services.”
The company said it benefited from lower oil prices as well as slow steaming, cost-cutting measures and “sale activities to take profitable cargoes such as reefer cargoes.”
