Asian container shipping firms see business shift as war lifts freight rates

RIYADH, Mar 18 (Arab News): Profits of container shipping companies in China and Taiwan reflect how the sector is dealing with global disruptions, at a time when the war on Iran is dampening hopes of reopening the Red Sea and driving freight rates up, providing a welcome breather after a year of declining profits.
Both China's Orient Overseas International and Taiwan's Evergreen Marine reported sharp declines in profits, as the prospect of reopening the Red Sea shipping route before the war began exacerbated the oversupply that kept prices low for most of last year. Taiwan's smaller shipping companies, Yang Ming Marine Transport and Wan Hai Lines, also saw a decline in profits.
Momentum now appears to be shifting toward change, despite ongoing uncertainty. While container shipping companies have significantly less exposure to the Strait of Hormuz compared to oil tankers, the escalation of the war has effectively dashed hopes for a full reopening of the Red Sea this year, although forecasts remain difficult.
Goldman Sachs analysts, including Herbert Lu, wrote in a note: "A closure of the Strait of Hormuz could lead to disruption of container sailings and port congestion at other alternative ports, which could create upside risks for freight rates."
Global container freight rates rose 8.4 per cent to $2,123 per forty-foot container in the week ending March 12, marking the second consecutive week of increases after nearly two months of decline, according to the Drewry World Container Index.
Meanwhile, Citigroup analysts led by Kaseedit Choonnawat wrote in a note that "Asian shipping companies may see a gradual improvement in spot rates until mid-year," assuming a de-escalation of the conflict after US and Israeli military objectives are achieved, and energy costs return to normal.
Orient Overseas stated that "the pace of geopolitical developments is accelerating, and with the potential for any single event to have an immediate impact and wide-ranging repercussions, it is becoming increasingly difficult to accurately predict market trends."
War-related disruptions are causing turmoil in global supply chains, forcing shipping companies to deal with challenges including halted transits and rising fuel costs.
Yang Ming said that "complex transshipment arrangements have increased operational challenges," noting reduced capacity on Middle East routes. It added that this places "additional pressure on port operations and increases the risk of terminal congestion, alongside rising insurance premiums and fuel costs."
COSCO Shipping Holdings, China's largest maritime transport company, and Evergreen Marine are among the Asian companies that have suspended Middle East bookings, joining global competitors like A.P. Moller-Maersk, Hapag-Lloyd, and CMA CGM. COSCO Shipping is scheduled to announce its annual results on March 19.
Despite this, these companies might have an advantage over their European competitors, according to Bloomberg Intelligence analyst Kenneth Loh, due to "cost leadership and strong expansion," while European competitors focus on schedule reliability and offering premium services.