RIYADH: Profits of container shipping companies in China and Taiwan reflect how the sector is dealing with global disruptions, at a time when the war on Iran is dampening hopes of reopening the Red Sea and driving freight rates up, providing a welcome breather after a year of declining profits.
Both China’s Orient Overseas International and Taiwan’s Evergreen Marine reported sharp declines in profits, as the prospect of reopening the Red Sea shipping route before the war began exacerbated the oversupply that kept prices low for most of last year. Taiwan’s smaller shipping companies, Yang Ming Marine Transport and Wan Hai Lines, also saw a decline in profits.
A potential shift in market direction
Momentum now appears to be shifting toward change, despite ongoing uncertainty. While container shipping companies have significantly less exposure to the Strait of Hormuz compared to oil tankers, the escalation of the war has effectively dashed hopes for a full reopening of the Red Sea this year, although forecasts remain difficult.
Goldman Sachs analysts, including Herbert Lu, wrote in a note: “A closure of the Strait of Hormuz could lead to disruption of container sailings and port congestion at other alternative ports, which could create upside risks for freight rates.”
