SIMIC

Carriers that focused on quoting spot rates are seeing their revenue fall, while those that preferred to negotiate long-term contracts are maintaining their income.

Paris-based Alphaliner said spot-focused carriers like HMM and Zim had seen their average revenue fall nine and seven per cent respectively to US$3,387 and $3,596 per TEU.

"As long as contract rates remain intact, the industry is likely to see a widening two-tier market," said Alphaliner, while asking whether long-term contracts were legally enforceable given radically different circumstances.

Said Global Shippers Forum director James Hookham: "In the past, the technique used by shippers was to not commit all their volumes to contracts."

However, that was pre-Covid methodology that has changed and, with shippers being warned at the beginning of the year that high spot rates could last for 30 months, encouraged shippers to agree to contracts.

At the beginning of the year interest rates were rising and the slump in demand gathering pace, and the GSF was warning members to consider these macro-economic factors.

Had shippers included an element of indexing contract rates to the spot market? Mr Hookham said they had not and added: "It will be interesting to see whether shippers will pay the very high rates seen at the beginning of the year. There is not a lot of case law in this area."

As carrier fortunes start to diverge as a result of the slump in spot rates on the key Asia-Europe and transpacific trades, Alphaliner said their operating margins will be the key indicator of their differing fortunes.

Operating margins measure the profit on sales after costs, such as wages and bunker fuel, but before paying interest and tax, and are calculated by dividing an operating income by net sales.

According to Alphaliner, seven of the top 10 carriers saw their operating margins fall with the fall in the spot market and a substantial increase in costs, mainly fuel.

Only Cosco, Evergreen and Maersk saw an improvement in operating margins in the second quarter, compared with first quarter - calculated on the shipping business only.

Overall, carriers saw a decline in Q2 margins, to 56.3 per cent, compared with 57.4 per cent in Q1. Wan Hai and Zim recorded the biggest drop, from more than 60 per cent to the low 50 per cents, according to Alphaliner.

"Despite the widespread fall in margins, the majority of carriers reported higher (or even record) quarter-on-quarter operating profits in the second quarter," it said.

Chief among those were Maersk, Hapag-Lloyd, CMA CGM, Cosco, Evergreen and ONE. Maersk, Hapag-Lloyd and ONE all increased their average revenue per container by nine, five and three per cent, respectively. In contrast, spot players HMM and Zim saw revenue per box fall nine and seven per cent respectively.

"Evergreen has racked up record profits after benefiting from the timely delivery of tonnage, which has enabled it to expand during a period of high rates without needing to charter-in expensive tonnage," said Alphaliner.

That is compared with CMA CGM, whose costs, including port, bunkers and chartering, increased 22 per cent in the second quarter.