Analysts expect turbulent waters ahead for Taiwan’s top 3 container shipping companies. December revenues for Taiwan’s top three container shipping companies plummeted 40-50% from the same period a year ago due to inflationary pressure, sluggish demand, and collapsing shipping rates, reports Taiwan News.
Impact of inflation
Evergreen Marine announced consolidated December revenue was NT$29.144 billion (US$955 million), a month on month decrease of 19.25% and when compared to the same period a year ago, a decrease of 44.2%.
Yangming Marine experienced similar troubles as December revenue was NT$16.36 billion (US$955 million), a monthly decrease of 16.58%, and in comparison to the same period last year, a decrease of 53.4%. Wan Hai Lines fared equally badly with December revenue of NT$11.4 billion (US$374 million), for a decrease of 50.7% over the same period a year earlier.
In a China Times article, Evergreen pointed out that recent shipping rates had continued to be under pressure due to factors such as inflation, the Ukrainian-Russian war, and China’s continued COVID pandemic. It said all of these factors are affecting overall demand.
The hope for future
Shipping companies do remain hopeful about the year ahead. At present, key freight rate indicators such as SCFI and CCFI have gradually stabilized. However, there are worries that a slowing economy can have a deferred effect on shipping rates as the monthly decline in December revenue indicates a larger economic trend.
Yang Ming said rapidly changing supply and demand in the shipping market makes it difficult to grasp overall development in 2023. Current market conditions point to unfavorable factors such as global inflationary pressure affecting consumer purchasing power; geopolitical worries such as the Russia-Ukraine war, labor shortages disrupting supply chains, and factories closing early for holidays.
Favorable factors for the shipping market, according to Yang Ming, include the implementation of environmental protection regulations which may affect both the speed and the number of cargo ships. This could lead to reduced shipping supply, which could temporarily balance supply and demand.
Additionally, Yang Ming was hopeful that should many countries meet economic development goals and targets, an explosive follow-up recovery period could be anticipated.
Vessels over 400 gross tonnage will be subject to new environmental protection regulations in effect requiring compliance with mandatory carbon emissions reductions as outlined by the Energy Efficiency Existing Ship Index (EEXI).
In effect, container shipping companies will need to optimize route planning and operation strategies to meet carbon reduction goals. This will be a difficult challenge when considering the unpredictability associated with larger fluctuations of supply and demand for shipping services.
And most importantly, shipping container companies will also need to meet increasingly higher expectations for the punctuality rate of routes and customer service quality.
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Source: Taiwan Times