It is worth noting that on March 26, 2024, 9,971-teu container vessel named DALI went on to collide with Francis Scott Key Bridge, which was near the Port of Baltimore. The vessel happened to be chartered-in by A.P. Moller-Maersk-APMM, and it went on to state that no crew or any sort of personnel from APMM happened to be aboard the ship. Apart from APMM, certain other major carriers calling at the port of Baltimore happen to be MSC, CMA CGM, Hapag-Lloyd-HLAG, Evergreen, COSCO Shipping, and ZIM. Barring ZIM and also Evergreen, other carriers have invoked force majeure, thereby passing on additional costs as far as rerouting to other ports onto the shippers is concerned. Due to this, stock prices when it comes to publicly listed carriers have gone on to strengthen.
It is worth noting that APMM’s stock increased 8.3% between March 26 and April 4, while the broader Drewry Container Equity Index went on to rise 5.1% in the same period.
Based on a sample taken for 11 companies, the container shipping industry went on to report an aggregate EBIT loss margin worth 6.2% in the fourth quarter of 2023. Moreover, carriers such as ZIM, Wan Hai, and Yang Ming went on to report annual EBIT losses within 2023, to be joined by giants such as APMM and HLAG in 2024. Hence, the Drewry Container Equity Index went on to fall 6.7% YTD, ending April 4, 2024, as compared to the WCI’s 76.3% surge because of the impact of the Red Sea disruption, which took place in the first quarter of 2024. But the fact is that WCI has gone on to decline for 9 weeks straight and happens to be 28.5% less than its peak in January 2024.
Although the large-scale acquisitions have gone on to slow-down, container liners have kept investing in logistics service providers. In YTD, Evergreen went on to acquire an inland logistics provider named Italia Marittima with a 100% stake. HLAG got a logistics consulting services provider named ATL Handling and Haulage, and MSC acquired a 42% stake in freight forwarding as well as logistics specialist Clasquin. Notably, APMM went on to recently go ahead and spin off their towage business called Svitzer in order to focus on integrated container shipping, port operations, and logistics, which happens to be a strategy they are kind of looking forward to bolstering with the probable acquisition of logistics giant DB Schenker.
The fact is that container shipping companies keep investing in fleet expansion as well as upgrades. This is pushed by the desire to maintain market share and at the same time also complying with environmental regulations. ONE recently went ahead and unveiled its strategy to go ahead and also expand its fleet size to 3.0 mteu by this decade, from the present 2.3 mteu, which happens to include an orderbook of 0.5 mteu. This move will go ahead and put immense pressure on HLAG so as to order more vessels to maintain the spot just above ONE, as the former’s fleet size is 2.3 mteu, which happens to have an orderbook of 0.2 mteu. As far as the fleet upgrade front is concerned, CMA CGM has gone on to earmark 100 vessels to be retrofitted at Damen Shiprepair Dunkerque as well as Damen Shiprepair Amsterdam yards in order to increase fuel consumption efficiencies by between 5% and 10%.
While the freight rates have continued to decelerate post-jump in the first quarter of 2024, the charter market has gone on to become robust in February 2024 as carriers happen to grapple with the rollout of additional vessels across the Cape of Good Hope, as reflected in the low idle fleet of 1.4% in February 2024 as against 3% in January. Hence, the 1-year TC rates in February 2022 for 3,500-teu and 5,500-teu vessels took a leap of 10.7% and 46.7% MoM, respectively. This surge in chartering costs will go on to erode the increase in revenues from elevated spot rates in the first quarter of 2024 for the chartered portion of carriers’ fleets. The strong charter market happens to be also boosting second-hand prices. In February 2024, the prices for 10-year-old 1,700 teu as well as 4,000 teu vessels hiked 7.1% MoM and 4.2% MoM, respectively.
It is worth noting that container shipping companies happen to be still facing issues due to overcapacity, even if there has been temporary relief from the Red Sea crisis.
