The financial performance of ocean carriers will deteriorate in the second quarter as falling freight rates and rising operating costs hit shipping companies’ bottom lines, according to a new report from Alphaliner.
Hopes for a rapid recovery in container shipping have “evaporated” with little sign freight rates will show any significant improvement before July, according to the container market analyst.
“The momentum is moving against carriers this year, with freight rates still trending down, even as the traditionally strong summer season looms,” Alphaliner said.
The pessimistic report follows several negative financial reports from carriers. APL, Hanjin Shipping and Hapag-Lloyd all reported losses in the first quarter, and Maersk Line parent A.P. Moller-Maersk warned in reporting stronger first-quarter earnings that it expects a slimmer profit later in the year.
Carriers are warning about slot and container shortages but tightness has not materialized so far amid the addition of significant new ship capacity and on-going investment in new container equipment.
Average operating margins of the five main carriers shrunk from 13 percent in the final three months of 2010 to -1 percent in the first quarter of 2011.
But this masks a wide variation in the operating margins among carriers — ranging from 7 percent for Maersk Line to -13 percent for CSAV in the first quarter.
Alphaliner said the varying performance among carriers could prolong the current downturn as concerted action to curb oversupply is delayed.
Weak ship utilization rates are hampering efforts to raise freight rates, the analyst said. Rate hikes of $200 to $300 per 20-foot container which were scheduled for May have been postponed to June due to strong market resistance.