Carriers Report Strong Results Despite Fourth Quarter Declines

The first financial reports are emerging for the end of 2022 providing a sense of the depth of the impact the declines in volumes and sharp fall in rates are having on the major carriers. While the downturn in the market had been broadly forecast, the first reports show differences in how it is impacting carriers in part by route and by the amount of contract business versus short-term spot markets.

Two of the largest carriers, Hapag-Lloyd (fifth in Alphaliner’s Top 100) and Ocean Network Express (ONE) (seventh in Alphaliner’s ranking by capacity), each released their financial results for the last three months of 2022. The carriers are similar in size (capacity of nearly 1.8 million TEU for Hapag and over 1.5 million YEU for ONE) and their reports showed the varying impacts of the market downturn.

Hapag’s results show the carrier went against the expected market trend during the last three months of the year. Container volumes were flat at 2.9 million for the period compared to the year earlier and basically flat with the third quarter of 2023. Revenues were up year-over-year when calculated in Euros and while strong at $8 billion for the quarter were down when the currency conversion was calculated into the numbers. Fourth quarter revenues in Euros were down nearly 20 percent compared however to the third quarter.

The company is highlighting the strength of its long-term contracts noting that a higher percentage of its volume is transported under these contracts. “However, already by the end of the year, the freight rate had significantly come back down as congestion eased and demand declined,” the company writes in its preliminary financial report. Hapag’s average contract freight rate fell 15 percent from the third to the fourth quarter, but for the full year 2022, it was up more than 40 percent. 

Hapag is crediting those strong rates as being the primary driver helping the company to “achieve extraordinarily strong result in its anniversary year 2022.” Preliminary figures show that Hapag’s revenues were up nearly 40 percent in 2022 to a total of $36.4 billion. On a dollar basis, the full-year EBIT was up by two-thirds to a record $18.5 billion. While they were down 20 percent year-over-year in the fourth quarter, Hapag-Lloyd still achieved a profit of $3.3 billion in the quarter.

While the strong contract freight rates led to the strong year, Hapag, however, noted that “disruptions in global supply chains and inflation have led to a significant increase in costs.” The company will provide its full financial report and comment on its 2023 outlook in its year-end report scheduled for March 2.

ONE, on the other hand, reported stronger declines in the same three-month period pointing to cargo demand decreases, especially in East-West trades mainly due to the increase in inventories in North America, which the company said became clearer in July-August. They also highlighted a decline in consumption in Europe due to progressive rising inflation. At the same time, they said declines in port congestion resulted in an increase in tonnage supply.

The carrier based in Japan reports its revenues were down by a third in the last calendar quarter of 2022 to nearly $6.3 million. ONE said it experienced a “significant deterioration” in its profit, which was down 40 percent year-over-year and by half between the September and December ended quarters.

For the final three months of its fiscal year (ended March 31) ONE sees further deterioration due to the softening of supply and demand. Over the three months, they are forecasting that revenues will fall nearly an additional 30 percent as the number of blank sailings is expected to increase due to the longer slack season around Chinese New Year and the time it takes for the cargo volume to recover after the holidays. Despite that, ONE still forecasts a profit of $14.7 billion for the full year on revenues of more than $29 billion.