Japanese liner operator Ocean Network Express saw profits fall by 97% in the second quarter on the back of weak demand and stagnant freight rates.
Net profit sank to $187m in the period from July to September, down from $5.5bn in the same period last year.
Peak season had failed to produce any strong recovery in cargo movement, the Singapore-based company said.
The carrier added the supply-demand balance had softened due to an increase of newbuildings.
Major east-west routes had experienced “stagnant freight rates”, it added.
Cargo movement to North America has lacked sustainability while lower inflation in Europe has not led to a full-fledged recovery in cargo movement.
Revenues were, therefore, down by 62% compared with the previous corresponding period to $3.5bn.
Looking forward, ONE is now forecasting a profit after tax of $851m for the full financial year.
That is massively down — some 94% — on the previous year’s profit of nearly $15bn.
Revenues for the full year are expected to halve from $29.2bn to $14.8bn.
ONE expects a gradual recovery in the second half.
But the company believes the freight market is expected to remain weak due to the supply and demand imbalance.
Ongoing global economic challenges
“The global economy continues to face headwinds as a result of high inflation, interest rates and energy costs,” said chief executive Jeremy Nixon.
“As a result, consumer demand is subdued and customer inventory levels are generally rebalancing to more conservative levels.”
“Post the mid-autumn holidays in Asia, we have witnessed a slower recovery in booking demand on the Asia-Europe and transpacific trades, whilst the intra-Asia and the Latin America trades seem more resilient.”
ONE is a member of THE Alliance, which is responding to the weaker demand by making a number of structural network deployment changes.
That was necessary “to align supply better with the more subdued demand outlook”, Nixon said.
The changes are intended to reduce the need for ad-hoc sailing withdrawals and to overall improve on-time vessel schedule reliability, he added.
Last week, THE Alliance members Hapag-Lloyd, ONE, Yang Ming Marine Transport and HMM announced the suspension of two key east-west services to stem the decline in freight rates.
The carriers are suspending their EC4 and FE5 services operating from Asia to the US East Coast and North Europe “in consideration of the present market”.
The two services account for around 20 vessels up to 14,000 teu.
