The short-term freight rate market continued to decline due to sluggish cargo movements and pressures from the supply side as new vessel deliveries continued. However, freight rates rose due to geopolitical uncertainty surrounding the situation in the Middle East in 4Q. For the full year, net profit is US$ 974 million (YoY -US$ 14,024 million).
•While consumer spending remained strong in North America, lingering inflation was a drag in Europe, and cargo movements generally did not recover in earnest.
•High tonnage supply continued due to the influx of new vessels. However, rerouting via the Cape of Good Hope (CoGH) as uncertainty surrounding the situation in the Middle East continued, resulted in a reversal of the oversupply situation.
•As a result, market conditions continued to decline until the end of calendar year 2023, but short-term freight rates rose significantly in FY2023 4Q.
2.Liftings, Utilization Rates,and Freight Index in Major Trades
➢Liftings, Utilization rates: The North America Eastbound liftings decreased as the cargo movement slowed down during Chinese New Year and as some east coast services rerouted via the CoGH and turn time extended. On the other hand, the utilization rates increased compared to 3Q due to continuous blank sailings. Both liftings and utilization rates improved significantly compared to the same period last year. Europe Westbound cargo volume was weak in 3Q due to a decline in cargo movements during the low season and blank sailings, while cargo volume remained steady in 4Q except for a drop due to Chinese New Year, resulting in a flat lifting level Q on Q. Coupled with the service disruption caused by the rerouting via the CoGH, the utilization rates have increased. Compared to the same period last year, where a noticeable drop in cargo volume after the pandemic was seen, cargo volume has recovered in 4Q. Despite the increase in cargo volume, the utilization rates remained at a slight decline due to service disruptions via the CoGH reroute.
➢Freight Index : Rerouting via the CoGH has created a tighter supply and demand for ships, therefore short-term freight rates have risen sharply in Europe and North America in January. However, there has been a gradual downward trend since the Chinese New Year due to a slowdown in cargo movement and the practise of rerouting via the CoGH becoming more established.
3.FY2024 Full Year Forecast
Outline
As the current economic and geopolitical environment is expected to persist for the foreseeable future, full-year results for FY2024 are expected to show a profit after tax of around US$1,000million, a slight increase from the previous year.
•While some recovery in cargo volume is expected mainly in the US, it is unlikely to be a full-fledged recovery due to geopolitical instability and ongoing inflation.
•With the increase in supply caused by the influx of the large number of new vessel deliveries, supply will continue to exceed cargo demand. Meanwhile, the routing via the Cape of Good Hope due to the uncertain situation in the Middle East is expected to have a significant impact on the supply-demand balance during the first half of the fiscal year, leading to high demand for vessel capacity.
•Given these circumstances, the current supply-demand balance is expected to continue. ONE will continue to monitor the situation carefully, focusing on maximizing profit by flexible tonnage deployment and efficient equipment control based on demand.
4.ONE’s Response to Recent Changes in the Business Environment
Events
➢Cargo movements from Asia to North America during January to March increased by 20.5% year-on-year thanks to the continued domestic consumption levels in the United States. However, the large double-digit increase is mainly due to a backlash from the same period of the previous year. Additionally, cargo movements from Asia to Europe increased by 11.5% in January and February. Prolonged inflation has caused a stagnation in consumer spending, and a tightening of monetary policy led to downward pressure to the economy. As a result, it is expected that a full recovery in cargo movements will take more time.
➢The increase in supply caused by the influx of the large number of new vessel deliveries will continue. However, the uncertainty around the Middle East and the rerouting through the CoGH from the end of calendar year 2023 has resulted in the tight supply-demand balance especially in January and February.
➢The temporarily tight supply-demand balance for shipping tonnage has softened moderately due to a slowdown in cargo movement after the Chinese New Year and a lull in the switch to the Cape of Good Hope route.
➢Although traffic restrictions remain in place through the Panama Canal, congestion and waiting times are improving as the rainy season approaches.
ONE’s response
➢Implemented flexible counter measures to minimize supply chain disruptions caused by the situation in the Red Sea.
➢Continued to take flexible measures for the North America East Coast route, including the CoGH route, while monitoring congestion at the Panama canal and the availability of its passage slot.
➢Implemented flexible service adjustments in line with supply and demand.
➢Optimization of ONE’s container distribution by efficient container repositioning.
➢Increased special cargo shipments through the strengthening of special cargo sales.
➢Established West Asia Regional Headquarters in Dubai, to enhance the presence of ONE within Indian Subcontinent, Middle East, and East Africa market
Initiatives for FY2023 4th Quarter
Initiative
1.As a container shipping company that supports the supply chain, ONE will make investments to continuously provide high-quality, safe global transportation services.
2.ONE has positioned green strategy as a top management priority and will continue to address industry challenges, including decarbonization.
3.ONE will continue to enhance digitalization, operational efficiency, and risk management to further increase industry-leading profitability and safety, to achieve sustainable growth
Investment
➢Obtained Approval in Principle (AiP) for the 3,500TEU ammonia dual-fueled vessel, jointly
developed by ONE, Nihon Shipyard Co., Ltd and classification society DNV (Jan).
➢Launched Indian Ocean Mediterranean (IOM) service that connects India with the Mediterranean region (Jan).
➢Revamped Adriatic Feeder Service(AIB)(Jan)
➢Announced the launch of Asia Pacific 1 (AP1) service, a new route connecting Asia and the U.S. West Coast (Feb).
➢Established West Asia Regional Headquarters to expand the presence of ONE within Indian Subcontinent, Middle East, and East Africa market (Mar).
➢Announced the restructuring and establishment of feeder service in the Nordic and Baltic Sea
(Mar).
Environment
➢Inauguration of European Union Allowance (EUA) trading with BNP, following the launch of the
emissions trading scheme in the EU (Feb).
Digital
➢Added Quick Booking function to eCommerce(Mar).
Others
➢Hosted the third Container Shipping Summit in Nagasaki (Mar).
Source: Kline
