The average operating margins for the top 13 ocean carriers finally returned to the black for the first half of 2017. This is first time since the second quarter of 2015 where the average operating margin is positive. These results have eased some, but not all, of the concern shippers have regarding the financial stability of the containership industry.
Out of the 13 carriers that published their first half results, nine announced positive results which is a stark change from the losses posted during the same period last year. The news is not all positive as four carriers still managed to remain in the red even though the market was susceptible to higher freight rates. CMA CGM posted an industry best operating margin of 7.1% while Hyundai continues to struggle and posted an industry worst operating margin of -9.5%.
For most of the carriers, the positive operating results are expected to continue for the remainder of the year. Industry experts are forecasting that 2017 will produce a $5 billion profit for the containership industry. This is a significant turnaround from the $5 billion loss that the industry suffered in 2016. If demand remains strong through the fourth quarter, the potential industry profit could exceed the current $5 billion projection. Of course, demand could drop significantly in November and December. How the carriers react will determine the impact on the overall profit for the industry. Will the carriers remain disciplined or will they slash rates to fill their ships? Anyone that remotely follows the containership industry already knows the answer. When rates are declining, market share always trumps profitability in the eyes of a carrier.
The International Housewares Shippers Association (IHSA) is a not-for-profit association formed to benefit companies belonging to the International Housewares Association (IHA). Through the combined leverage of members, IHSA negotiates freight contracts and partners with other logistics providers to lower supply chain costs.
IHSA’s main function is to negotiate the lowest possible transportation rates and provide the highest quality service for all participating members. Additionally, IHSA members receive valuable market intelligence and advice through regular newsletters and briefings.
IHA member companies looking to reduce their ocean freight costs or have questions about an ocean freight issue are encouraged to contact IHSA to learn about the program. Contact IHSA at +1-513-489-4743 and learn more on our website.