ONE’s Q2 returns show volumes up but profits crash

Ocean Network Express (ONE) is set to undergo a series of cost-saving initiatives as its second-quarter returns show a 1% increase in cargo volumes yet still saw a 97% slump in its first-half revenues compared to the previous year.

The Singapore-based carrier recorded first-half volumes of 5.91 million TEUs compared to 5.83 million TEUs in the first two quarters of 2022 but saw revenues crash from a little over US$11 billion to just US$700 million over the same period.

“In North America, cargo movement showed some momentum in August but lacked sustainability against the backdrop of weak general consumption and other factors. In Europe, a gradual recovery trend from the decline in demand caused by high inflation was seen, however, it did not lead to a full-fledged recovery in cargo movement,” said the ONE.

The box line said that while it expects the slow recovery of consumer economies over the course of the financial year the supply and demand gap will persist as a significant number of newbuildings are delivered.

Drewry Shipping Consultants calculate that on average another two million TEUs will be delivered every year for the next three years. Given the expected persistence of over-capacity in the container shipping sector, ONE said it will take remedial actions including “flexible tonnage deployment and efficient equipment control based on demand”.

As such, blanked sailings and the continued ‘restructuring’ of services are likely to be a feature of the sector in the coming years, as well as slow steaming and optimisation of tonnage deployment in each trade.

Moreover, the line said it will return leased equipment and manage tonnage through the development of new services in the intra-Asia and Latin America trades. The carrier added that it will seek out special cargo shipments by strengthening its special cargo sales.

Alphaliner reports that ONE plans to introduce an Indian Ocean Mediterranean ‘IOM’ service as from mid-January 2024. The carrier is expected to offer the service through a co-loading arrangement on the India – Mediterranean section of HMM’s Far East – India – Mediterranean ‘FIM’ loop, which is an extension of HMM’s China – India ‘CIX’ service.

These measures are aimed at mitigating the forecast slump in returns with the carrier expecting this financial year’s full year results to see a collapse of its income of more than US$14 billion, from a little under US$15 billion to US$851 million in total.

Supporting that dismal view is ONE’s freight indexes that measure the headhaul routes for the major east-west trades, which saw the Pacific index fall from 372 in the first half of the last financial year to 117 and to 127 from 529 on the westbound Asia to Europe services. With utilisation rates on both trades at 95% in 2022 and at 89% and 93% this year respectively.

“The North America eastbound liftings increased due to resolved supply chain disruptions and the start of the peak season. The utilisation rates recovered particularly in West Coast trades,” noted the company, adding that “Asia Europe westbound routes witnessed some recovery in liftings, but the utilisation rates worsened against the backdrop of increased supply tonnage.”

ONE said the switch from contract rates to current freight rate levels now reflects the softening conditions that are being seen across markets as the industry returns to pre-pandemic conditions.

Last but not least, ONE has taken delivery of three new vessels this year and still has orders for a further 39 ships.