Smaller liner operators are bearing the brunt of losses which are returning to haunt the container shipping sector.
But the container market has not yet returned to a normalised market with operating margins still better than in the pandemic years.
So far, two leading liner operator carriers have posted significant losses in the year-to-date.
On Monday, Israeli liner operator Zim reported a net loss of $58m for the first quarter, although Taiwan’s Wan Hai Lines has fared even worse.
Wan Hai logged a loss of TWD 2.1bn ($68.1m) in the first quarter of the year, sharply reversing a $1.3bn in profit it made in the same quarter last year.
That was the Asian carrier’s second consecutive quarterly loss, following its first loss since 2017 in the fourth quarter of 2022.
The sharp drop in container freight rates and volumes is being felt most by carriers more exposed to the spot market.
Larger carriers have been buffered from the tailwinds of contract cover from the boom years, as well as a diversity of operations, says Alphaliner.
But the advantage of high contract cover is expected to wane over the year as new contracts are signed at lower prices, the analyst added.
Zim and Yang Ming are among the liners with the highest capacity deployed on the lossmaking transpacific, which accounts for more than two-fifths of their fleets respectively.
Wan Hai deployed around 28% of its fleet on the transpacific and operates most of its fleet in the intra-Asia trade, says Alphaliner.
But the carrier has no exposure to the Asia-Europe and transatlantic trades which have shown more rate resistance, it said.
More losses
Further losses look to be inevitable for liner operators, Alphaliner argues.
The analyst notes that even large carriers such as AP Moller-Maersk and Hapag-Lloyd have flagged the possibility of deficits at a quarterly level.
Profits for nine mainstream liner operators that the analyst surveyed dropped to $6.9bn in the first quarter, down from $35.9bn a year earlier.
Despite the decline, results have not yet returned to ‘normal’ for the main carriers, who have historically posted margins in the region of 5% range, Alphaliner added.
Other than Zim, Wan Hai and Yang Ming, which had an operating margin of just 4.2%, carriers still had operating margins above 13%, it said.
Topping the list was Hapag-Lloyd with an operating margin of over 31%, reflecting its ability to stem the decline in liftings and freight rates.
