Matson Predicts a Slowdown in Transpacific Trade Through Mid-2023

Confirming the downward trend in the container freight market, Jones Act ocean carrier Matson announced Wednesday that it is seeing lower volumes on its China services and expects revenue to drop accordingly. 

In the fourth quarter, Matson's premium services from China to the U.S. West Coast saw lower year-over-year volume and brought in lower rates, and its executives expect these conditions to persist through the first half of 2023. 

"Business conditions remain challenging as retailers continue to right-size inventories amidst weakening consumer demand, increasing interest rates and economic uncertainty," said chairman and CEO Matt Cox in a market update. 

While its near-term outlook forecasts a slowdown, Matson is not planning on a major recession. "Absent an economic 'hard landing' in the U.S., we expect improved trade dynamics in the second half of 2023 as the transpacific marketplace transitions to a more normalized level of demand," said Cox. "Regardless of the economic environment, we operate the two fastest and most reliable [transpacific] ocean services and, as a result, we expect to continue to earn a significant rate premium."

Matson's preliminary financial results for the fourth quarter estimate operating income of about $70-80 million, far from the boom-time $470 million it posted in Q2 2022. The company's shares were down five percent in trading Thursday.

Matson's earnings numbers are a reflection of the overall drop in Asia-U.S. trade, and the same decline can be seen in the falling TEU count at major American container ports and the plummeting spot rates on the Shanghai Composite Freight Index. 

The slowing market has not deterred Matson from planning for the future. In November, as rates and volumes declined, Matson placed an order for three new LNG dual-fuel boxships with Philly Shipyard - paid for in part with cash from a blockbuster year in ocean freight.