Yang Ming sees darkening container outlook

Yang Ming sees darkening container outlook

Yang Ming reported a 16.8 percent increase in first-half revenue year over year to $2.44 billion, with a 5 percent rise in volume to 2.64 million TEU. Photo credit: Shutterstock.com.

Yang Ming reported a significant reduction in its financial losses during the first half of 2019, but at the same time signaled concern over a weakening trade environment and growing capacity overhang.

The Taiwanese carrier reported a 16.8 percent increase in first-half revenue year over year to $2.44 billion, with a 5 percent rise in volume to 2.64 million TEU.

While the improved business in the first six months — supported by what the carrier termed “improved cost structure driven by its fleet optimization plan” — was enough to help Yang Ming cut its financial losses by 66 percent compared with the same period last year, it was not enough to stave off a first-half net loss of $62 million.

A slight rise in bunker fuel prices affected Yang Ming’s operating costs, and the new International Financial Reporting Standard (IFRS) 16 accounting standard had a negative impact on its half-year profitability by about $19.37 million, the carrier noted.

“Consequently, the company’s operating performance was insufficient to yield profits in the first half of 2019,” Yang Ming said in its earnings statement.

The carrier managed to land a stable rating for its long-term outlook from the Taiwan Ratings Corp., an important stability indicator for a company that has long struggled for profitability and must regularly fend off takeover rumors.

After Yang Ming reported its first quarter loss of $21.9 million, Lars Jensen, CEO of SeaIntelligence Consulting, pointed out that the carrier had accumulated total losses of $1 billion between 2012 and 2018. Yang Ming reported a loss of $218 million last year.

Capacity pressure

The Taiwanese carrier highlighted an Alphaliner analysis that showed the container shipping market remained under pressure due to an oversupply of capacity. Yang Ming said according to the analyst’s projection for 2019, global volume will grow 2.5 percent while capacity is predicted to grow at 3.1 percent. 

At the same time, the carrier said market demand was weaker than expected with the ongoing United States-China trade conflict weighing on the global economy. 

Yang Ming is a member of THE Alliance and has cited the expanded membership and new service network of the vessel-sharing agreement as a positive development that will increase global services. Subject to the necessary regulatory approvals, HMM will join Hapag-Lloyd, Ocean Network Express (ONE), and Yang Ming as a full member of THE Alliance in a 10-year agreement starting April 1, 2020. 

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.