Israeli container line Zim is warning rates could tumble quickly once the Red Sea crisis is resolved.
The Haifa-based company is predicting a financially strong first half of the year and a weaker second half, chief executive Eli Glickman told TradeWinds on Wednesday.
But that prognosis could change quickly should there be a resumption of ships transiting the Red Sea.
“We are trying to be conservative,” Glickman said. “We cannot control the freight rates, we do control the cost side.”
That approach took into account the likelihood that the crisis involving the Houthi attack on commercial shipping would be resolved in the coming months.
Zim expects to report adjusted Ebitda between $850m and $1.45bn this year.
That is based on higher freight earnings in the first half of the year.
“There are several scenarios that can play out. We don’t control the timing of the Red Sea crisis,” Zim chief financial officer Xavier Destriau said.
“But irrespective of what happens there, there’s a lot of tonnage that’s going to hit the trades in the second half of 2024.”
“That in itself will put pressure on the rates. That’s why the first half will be better than the second half.”
If the situation in the Red Sea is resolved, rates will normalise very quickly, he said.
“If nothing happens in the Red Sea, rates might indeed trend upwards over the second half of the year.”
Crystal ball gazing
It was not possible to say when Zim would be able to begin Red Sea transits again.
“As far as we’re concerned, we do not want to take any risk for our crews, for our vessels, for the cargo of our customers,” Destriau said.
In the meantime, Zim is benefiting from higher container freight rates on key trade lanes like the transpacific.
Some of the contracted cargo has yet to benefit from rising rates.
“But we, nevertheless, expect to see some improvement in our P+L at least in the first part of 2024,” he said.
