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Weekly Briefing: Box lines count exceptional profits | Bulk owners make hay | Tankers see red

Lloyd’s List’s weekly headline view of the stories shaping the key shipping markets

The container line reporting season is upon us and expectations of exceptional markets are running high, much to the displeasure of their customers and apparently regulators, who are now investigating collusion claims. In the dry bulk market, it’s all looking positive still, with the smaller-sized bulk carriers generating rates in excess of $30,000 per day. But while container lines and dry bulk shipping companies are reporting stellar second-quarter figures, some familiar lines are emerging from tanker owners as they try to put the most positive spin on the worst spot market in two decades

Containers

THE second-quarter financial reporting season is now in full swing, with carriers, perhaps slightly shamefacedly, announcing that they are rolling in money.

Their celebrations will please neither their customers, who are paying record high rates for record low service levels, nor regulators, who are increasingly concerned over the impact of those freight rates on the rest of the business community.

Maersk, the bellwether of the container shipping sector and which reports on Friday, earlier this week announced it was raising its full-year earnings expectations on the back of the continued “exceptional market situation”.

Underlying earnings before interest, tax, depreciation and amortisation are now expected to be in a range of $18bn-$19.5bn.

The company said the strong quarterly performance had been driven by bottlenecks in the supply chain and equipment shortages caused by a strong demand rebound.

Average freight rates achieved in its Ocean segment were up by 60% and it had lifted 15% more containers in the second quarter of this year than in the corresponding quarter of 2020.

German rival Hapag-Lloyd, which reports next week, has also raised its guidance, with earnings before interest, taxes, depreciation, and amortisation now expected to be in the range of $9.2bn-$11.2bn for the full year, approximately three to four times 2020 ebitda of $3bn and approaching the level of revenues earned in the past year.

The company had previously expected a gradual normalisation of the earnings trend in the second half-year, but that now looks unlikely as freight volumes and rates remain high.

Ocean Network Express, however, was more circumspect as it reported a $2.6bn profit for the first quarter of its financial year, which began in April.

While it said it expected profits in the range of $6bn for its first half, it warned that the economic environment was changing as the global coronavirus backdrop changed.

The resurgence of coronavirus, which was behind most of the disruption in the supply chain, threatened to put more pressure on operations, and the uncertainty meant it had yet to finalise its full-year outlook.

ONE also pointed to rising costs as one element that was a cause for concern.

Rising costs have been largely overlooked in the carrier-earning bonanza, but with charter rates soaring, fuel costs rising and the spectre of decarbonisation on the horizon, container lines would do well to hold back some of their gains rather than spending it all on champagne and shareholders.

 

 

Dry bulk

bulker loading coal Credit: Tom Paiva / Alamy Stock Photo

Positive sentiment reigned in the dry bulk market this week, with the smaller-sized bulk carriers generating rates in excess of $30,000 per day, as strong demand for minor bulks, coal, steel and grains continued to boost employment. Fixtures were also heard as high as $50,000 per day in the ultramax segment on some routes as tonnage tightness forced charterers to pay up.

Higher demand for vessels has also come about because of low water levels in Argentina, which has been hindering the carriage of full loads, especially as a record corn season was taking off. The country is facing a severe drought, with the Parana River, the main waterway, impacted. Loads were said to be at 65%-75% of capacity, and could drop further should the situation not improve soon.

Elsewhere, bulker owners were reporting their best quarterly results in years.

While US-listed Diana Shipping said a return to the super-cycle days of 2008 was entirely conceivable, it warned that the “pleasant scenario could be ruined by an abrupt drop in demand due to factors unrelated to shipping or a sharp increase in new building orders”.

Safe Bulkers reported improved market conditions for its results, which beat analyst estimates, while Pacific Basin cited strong demand for its best half-year results in 13 years.

Smaller Greek owners focused on capesizes and handysizes said they were counting on a promising future.

 

 

Tankers

American Petroleum tanker's deck. Credit Brian Gauvin / Alamy Stock Photo

While container lines and dry bulk shipping companies are reporting stellar second-quarter figures, some familiar lines are emerging from tanker owners as they try to put the most positive spin on the worst spot market in two decades.

“Leading indicators for the tanker market continue to improve,” said one company; an “uneven” pace of global oil demand recovery is weighing on rates, highlighted another. All expressed hope that stronger fundamentals will be seen in 2022; and — the favourite so far — mentioned the seasonal ‘summer lull’ for a worsening situation.

D’Amico International Shipping, Scorpio Tankers and Teekay Tankers have between them reported $155m in net losses for the second quarter, with big names Torm, Hafnia and Euronav due in the coming weeks.

Tonne-miles of red ink are certain to be spilt as a reported new coronavirus outbreak in China threatens to derail what has been the most fragile of recoveries in the crude and refined product market. 


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