Grim outlook for container makers amid unstable global recovery

Shipping lines are also affected amid an unstable global economic recovery and weak demand

PUBLISHED : Thursday, 29 August, 2013, 12:00am
UPDATED : Thursday, 29 August, 2013, 5:08am

Container manufacturers wobbled along with shipping lines amid an unsteady global economic recovery in the first half, with the outlook for the second half equally uncertain.

China Shipping Container Lines, the second largest shipping liner on the mainland, yesterday posted another half-yearly net loss, 1.26 billion yuan (HK$1.58 billion), following a 1.28 billion yuan loss for the first half of last year.

It said demand on major trade routes saw a seasonal rebound in the third quarter and freight rates bottomed out in July but the industry outlook for the second half was still murky. The company moved 3.9 million twenty-foot equivalent units (teus) of containers, down 1.6 per cent year on year in the six months to June.

The slow movement of containers hit companies such as China International Marine Containers (CIMC). The world's largest container manufacturer reported a 41 per cent plunge in net profit to 552 million yuan for the first half and warned slow recovery and high inventory levels would weigh down any rebound in the container market in the near future.

Sales increased 4.5 per cent to 28.60 billion yuan and container production rose 15 per cent. But box prices slipped because of lukewarm demand and overcapacity, slashing the company's operating profit by 22.4 per cent to 1.12 billion yuan.

"During bad times, shipping lines are reluctant to invest in new boxes while they will continue to stretch the lifespan of old boxes," said Mai Boliang, CIMC executive director and president.

Up to 20 per cent of the existing 30 million container boxes across the globe are older than 20 years even though the average life span of containers is 15 years.

The container business has experienced a prolonged trough from the peak in 2007, compared with the normal boom-bust cycles that last five years.

Weak demand pushed up the inventory of containers to as high as 1 million teus this year. Currently it stands at around 600,000 teus, which is still a fifth above the normal level, Mai said. "The demand for standard dry containers in the second half is less likely to rebound," he said.

CIMC is also the mainland's largest manufacturer of road transport vehicles and one of mainland's leading offshore engineering equipment makers.

Shares in the firm rose 0.8 per cent to HK$12.14 yesterday.