Red Ink Warning for Yang Ming as Red Sea Spot Rate Gains Ease

By Mike Wackett (The Loadstar) –

Yang Ming slid into the red in the final quarter of 2023, with a net loss of $43m after a profit of $483m in Q4 22, but the Taiwanese carrier managed to hold out for a full-year profit of $153m.

“Amid inflation and economic slowdown in 2023, the overall freight levels of container declined compared with 2022, which led to a reduction in annual revenues,” said the carrier.

Final 2023 earnings results – from those carriers that publish their financials – provide further evidence of the dire outlook for the container liner industry prior to the supply chain disruption caused by the Houthi attacks on commercial shipping.

Short-term rates had clearly collapsed to sub-economic levels towards the end of last year, with the looming danger of contagion into the carriers’ bread and butter contract business.

Since ships began to be rerouted around the Cape of Good Hope, headhaul container spot rates have trebled on the Asia-Europe and transpacific (despite it being least-impacted) tradelanes by way of diversion surcharges and GRIs. But they are now beginning to fall back, albeit not to the levels seen before the Red Sea crisis began.

This week’s Xeneta XSI Asia-North Europe spot declined 7%, to an average of $3,966 per 40ft, having lost 18% since reaching a peak on 22 January.

Some contacts have told The Loadstar that a couple of Asia-North Europe carriers were starting to consolidate their Red Sea diversion surcharges into new FAK (freight all kinds) rate offers.

“This worries me a bit,” said the director of a UK-based NVOC, “because if and when it’s safe to send their ships back through the Suez Canal, the surcharge element of the rate might be conveniently forgotten.”

He was also concerned about the few sailings that are transiting the Red Sea on an ad-hoc basis, both from the perspective of diversion surcharges still being levied and the potential issue with cargo insurers over war risk.

“We don’t get advised which ships are going through the Suez Canal, and only find out after this has happened, and then we have to reject the surcharge. But I’m really concerned with what would happen insurance-wise if there were to be a casualty,” he added.

Meanwhile, the Freightos Baltic Index (FBX) Asia-Mediterranean reading declined by 5% on the week, to $4,972 per 40ft, down some 21% since its mid-January peak.

According to a carrier source, bookings post-Chinese New Year have been “worse than expected”, which was confirmed by the Ningbo Containerized Freight Index commentary this week, which reported that “most carriers are short of cargo”.

This could lead to a period of heavy discounting and an acceleration in the spot market erosion on the route.

Elsewhere, on the transpacific, demand remains quite robust and carriers are having more success in holding onto their direct and indirect Red Sea crisis gains.

For instance, the FBX Asia-US west coast reading edged down just 1% this week, for an average of $4,754 per 40ft, while its reading for the US east coast also slipped by 1%, to $6,652 per 40ft.

And on the transatlantic tradelane, the recent gains from carrier GRIs have continued to wane, with the XSI North Europe to US east coast component sliding another 2% this week, to $2,047 per 40ft, and is slowing falling back toward break-even levels.

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