Shipping crisis worsens: container shipping companies with too low margins

The shipping industry is facing dark times: the average EBIT margin of the nine largest container shipping companies fell to an alarming 1.5% in the third quarter of this year. By comparison, the average margin in 2019 was still 2.4%. This worrying development is reflected in the financial results of four major liner shipping companies, which recorded operating losses in the third quarter - double the figure for the previous two quarters.

The overall situation is not significantly alleviated by the sharp fall in operating costs. The British analysis service Drewry reports that operating costs have fallen by 18.1% compared to the same quarter last year, mainly due to falling charter rates and bunker costs. Despite these challenges, there are companies that are performing better. Thanks to a strict cost-cutting program, Cosco achieved the highest margin of 15.8 percent for the second time in a row. Evergreen, Hapag-Lloyd, Ocean Network Express/ONE and HMM follow with varying returns.

An additional burden for the industry are freight rates, which continue to fall despite an overall increase in cargo volumes. Only Cosco was able to record stagnation, while all other major shipping companies were able to record growth. The outlook for the fourth quarter is worrying and some companies have already forecast significant losses. Maersk, for example, is expecting losses of up to USD 970 million in the fourth quarter, while Hapag-Lloyd believes losses of up to USD 600 million are possible.

The entire industry is facing major challenges and the coming months will be decisive in determining how container shipping companies can hold their own in this crisis.

Source: DVZ - Deutsche Verkehrs-Zeitung
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