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ONE forecasts container market will continue to grow strongly

FROM reporting a loss in its first year of operations in 2018 to recently disclosing a pre-tax profit of $15.4bn, Ocean Network Express is about to enter a phase of expansion and investment.

There was considerable uncertainty and doubt back in 2017 when the three major Japanese container lines agreed to effectively merge into the ONE entity. It was at a time when container shipping results were hitting historic lows.

Despite that, the Japanese liner group delivered against its business plan of achieving a $1bn profit in the first three years of its existence. The latest positive results cap a period in which the group delivered a profit in each of the past three financial years.

The industry itself has seen an unprecedented turnaround in fortunes, partially due to the global pandemic. But there have been significant challenges which make ONE’s results even starker.

ONE has experienced a dislocation in the capacity and velocity of supply chains between the marine and inland operational environments. While all ships and containers have been fully deployed, resource restrictions at ports and inland logistics networks have resulted in persistent backlogs which adversely impacted vessel operations, causing heavy delays and extended waiting periods in major container ports.

Despite this, the underlying financial performance of the company is a cause for its long term optimism: ONE’s earnings before interest and taxes (ebit) margin in January to December 2021 was 53%. It says its scale as a major container line and its operational excellence are starting to yield “significantly superior” margins.

With a strong balance sheet, continuing strong margins and a constant effort to boost operating efficiency, ONE has adopted a positive outlook for both the medium and long term. It believes the container market will continue to grow strongly, with demand to and from Africa and Latin America emerging.

However, it warns there are ongoing challenges which need to be managed, including the enormous strain on the entire supply chain brought about Covid-19.

There are likely to be surges in consumer demand in many parts of the world as the pandemic eases, despite ongoing global tensions, and these will have a knock-on effect on ONE’s business. A surge in bunker prices and global inflation are also known and likely risks.

ONE is building a long-term strategy which has a commitment to decarbonisation at its core, and the group says it is making tangible efforts to ensure this becomes a reality.

As a global operator, ONE recognises that customer demand is changing and that the digitalisation wave is gathering pace across the globe. Transparency, decarbonisation and digitalisation have become the watchwords of the modern containerisation era.

ONE says moving towards net-zero shipping requires the transformation of the global container shipping industry’s future operating models, and it recognises its own role in ensuring the industry makes these changes in a rapid and effective way against the backdrop of shipping increasing its efforts to reduce GHG emissions by 2050.

ONE is investing in a Green Strategy that upholds clear environmental sustainability standards with new targets. It is based on the premise that the industry continues to push for improved sustainability initiatives, and involves high-level collaboration with customers, regulators, investors and other stakeholders.

The Japanese liner group says it must be bold in setting out these targets, so its new goals are aligned with those of its direct competitors, believing that the shipping industry's targets as a whole are too conservative.

Specifically, ONE's decarbonisation targets include cutting scope 1 GHG emissions by 70% per ton-kilometre by 2030 from base year 2008, and achieving net-zero GHG emissions (including scope 2 & 3) by 2050.

The Green Strategy includes goals ensuring partner yards comply with internationally-recognised recycling standards, and adopting a target of zero significant oil spills for the ONE fleet.

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