Freight rates slipped further last week with weakening demand continuing to pull down capacity utilisation on the Transpacific and Asia-North Europe routes. Rate pressure has shifted to the Asia-Europe trades with carriers still unwilling to remove any capacity on the route as the the temporary blank sailings in October have mostly resumed their regular sailings. The FE-USEC routes are also under pressure, forcing Zim to withdraw one string from the end of November. More capacity cuts are required to arrest the rate slide in a key test of carriers’ resolve before the new 2023 contract season starts.
Although idle capacity have risen sharply since September, it remains at just 1% of the fleet, with most of these ships due to return to service within the next few weeks.
Linerlytica
ZIM has slashed its 4Q 2022 EBIT earnings forecast to $440m to $740m, compared to $1,554m in 3Q 2022 due to falling freight rates and weaker liftings. Although ZIM has emphasized its commercial and operational agility, this will be tested over the next 2 years as it takes delivery of more than 50 newbuildings and committed vessel charters that will raise its operated capacity by some 70% (before charter redeliveries). Zim’s heavy reliance on chartered tonnage since its financial restructuring in July 2014 has put it at a disadvantage in the last 2 years as soaring charter rates have seen its charter expenses rise significantly, while it has been forced to commit to longer charter periods, with the average remaining duration on its chartered capacity at 27 months.. It has only 25 ships for less than 80,000 teu due for renewal in 2023, but has committed to take on some 30 ships for 250,000 teu over the same period. ZIM will need to find new employment shortly for 9 of its 4,000-6,000 teu ships due to the suspension of the ZSE SE Asia-US East Coast service starting from late November.
Weekly/Monthly Market Pulse: US$1,500/US$1,800 per year