Zim’s confidence in raising its forecast for record results this year is based on doubling contracted freight rates for its core transpacific services, expanding its volumes and an expectation that demand will grow as Chinese lockdowns end.

After reporting record net income of $1.7bn for the first quarter and lifting its Ebitda forecast for 2022 from $7.8bn to $8.2bn, Zim chief financial officer Xavier Destriau said the container line expects volume growth of 5% this year, despite the market contracting by 2% in the first three months.

“The transpacific contract rates we agreed last week are on average more than double compared to what we signed for at the same time last year,” Destriau said at its earnings presentation.

Zim’s contract rates were not far off current spot rates, he added, and were higher than expected earlier in the year when the line forecast an Ebitda range of $7.1bn to $7.5bn for 2022.

Spot rates from Asia to the US West Coast at the beginning of May were between $12,600 and $13,000 per feu on the Freightos exchange, due to reduced exports from China after the ongoing lockdown in Shanghai. But these rates are likely higher than contract prices due to the inclusion of elements like surcharges or other weightings.

Destriau said Zim expects the Shanghai lockdown to clear by June and be followed by a surge demand in the second half of the year as factories in China catch up on orders that have been delayed.

He added that port congestion caused by ongoing Covid pandemic restrictions are set to continue through this year and take out about 7% of total fleet capacity.

Congestion has doubled transpacific transit times from 45 days to an average of 103 days, he said, and vessels remained close to 100% full as a result.

Zim chief financial officer Xavier Destriau said the carrier has doubled the level of its contract rates on its core transpacific routes Photo: Zim

Destriau said he expects spot rates to normalise in the second half, with the carrier still benefiting by retaining its mix of contract and spot cargoes at 50% levels.

He told TradeWinds that normalisation will involve freight rates falling gradually to a new equilibrium as congestion eased but that this would be higher than pre-Covid-19 price levels.

It could take into 2023 as the peak season would add to supply chain issues, he added, noting that it took five months for the Port of Los Angeles to return to normal after industrial disputes in 2015.

US consumer demand remains healthy as retailers need to replenish stock inventories, which remain at low levels ahead of the peak shipping and shopping seasons, although volumes slipped on the transpacific early this year.

However, volumes have been growing on intra-Asian and Southeast Asia to Australian routes where Zim has expanded its capacity. About 25% of its transpacific and 20% of its intra-Asian cargoes were e-commerce bookings which can command higher freight rates, he said.

Deliveries of ships in 2023 would bring supply and demand into closer balance, but Destriau said continuing supply chain disruption was expected to offset fleet expansion.

Zim is set to take delivery of 46 ships between now and 2024, including ten 15,000-teu vessels and 18 LNG-fuelled 7,000-teu ships. Upfront cash payments amounting to about $500m over the period would reduce daily charter rates, Destriau said.