Ocean Carriers’ Operating Margins Down in Second Quarter But Up Over Last Year - Global Trade Magazine
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  September 15th, 2015 | Written by

Ocean Carriers’ Operating Margins Down in Second Quarter But Up Over Last Year

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  • For the first six months, margins for 16 carriers averaged 3.9 percent, compared to a–0.4 percent in 2014.
  • Carriers secured small rate increases on long-term freight contracts in the Asia-Europe and transpacific trades.
  • Ocean carrier rate gains were eroded by freight rate reductions in spot markets due to weak cargo demand growth.

The average operating margin of 14 large container shipping companies slipped in the second quarter of 2015. Margins averaged 5.2 percent in the first quarter and to 2.4 percent in the second, according to Alphaliner, an ocean shipping information company.

The numbers actually represent good for the carriers considering their performance during the same period last year: operating margins for the first quarter of 2014 averaged at –1.8 percent and for the second quarter, 0.4 percent.

For the first half of the year, the average operating margin for the 14 carriers, together with COSCON and OOCL, which publish financial results only semiannually, amounted to 3.9 percent, compared to a negative –0.4 percent in the first half of 2014.

According to Alphaliner, the improved performance is due mainly to a 47-percent reduction in fuel costs, compared to the first six months of last year. Carriers also secured small rate increases on their long-term freight contracts in January for the Asia-Europe trade and in May for the transpacific trade. “But the gains were eroded,” Alphaliner noted, “by severe freight rate reductions on the spot markets as the year progressed. The declining freight rate trend has been exacerbated by weak cargo demand growth, especially in the European markets as carriers failed in their repeated monthly general rate increase attempts on the Asia-Europe route.”

Although strong demand growth has been seen in the eastbound transpacific and westbound transatlantic trades, “rate gains have been limited due to the significant additional capacity introduced into these trades.” Based on Alphaliner data at the beginning of August, capacities have increased by six percent on transpacific routes and nine percent on the transatlantic routes.