Norway’s Wallenius Wilhelmsen has posted its best-ever quarterly profit but warned the red-hot car carrier sector still faces difficulties. The Oslo-listed operator of more than 130 ships said net earnings to 30 September were $246m, compared to $65m a year ago. “I am happy to see improved performance across all business segments,” said chief executive Lasse Kristoffersen. “Despite these positive results, we still experience a stretched labour market alongside limited vessel and port capacity. We are working hard to meet growing customer demand,” he added.

Revenue was up 37% from 2021 to a record $1.36bn, with shipping operations the most important element in the result as high fuel surcharges and healthy freight rates boosted performance. Ebitda of $440m was well ahead of the analyst consensus of $317m. “We also increased our operational efficiency with lower voyage expenses per cubic meter and full fleet utilization,” the CEO said. “Challenges remain despite having seen some improvements in port congestion in some geographies, as well as a greater availability of semiconductors,” he added.

Kristoffersen is expecting a continued favorable supply-demand balance, but he is closely following weakened macro-economic developments. The last known antitrust customer claim against the company was concluded in the third quarter. These price-fixing cases have cost the group close to $900m since 2012. “What happened was against the law and not according to our principles and procedures,” the CEO said. “I am very pleased to say that we for many years have moved on with new and renewed contracts with all customers. Compliance is at the core of our company, and it will continue to be so in the future,” he added.

Wallenius Wilhelmsen operates more than 130 vessels servicing 16 trade routes to six continents, plus terminals. The group has 82 owned ships. Two charter-in contracts remain up for renewal in 2022. “The decision to extend or redeliver the charters will be dependent on the overall market situation, including the price of charters, demand growth and the long-term fleet strategy,” the company said.

AP Moller-Maersk will slash capacity to meet falling container shipping demand in the coming months. The Danish liner giant currently deploys about 4.2m teu of capacity, but has been removing vessels from trades as rates have fallen. “If demand drops, then we will take capacity out in that same percentage,” chief executive Soren Skou told a conference call on Wednesday. In the transpacific and Asia-Europe trades, around 15% of capacity has already been removed from the container shipping market, he said. “So one could expect you will see more capacity adjustment to meet demand in the coming quarters — at least, that would be our strategy,” he said.

The capacity withdrawal follows the faster-than-expected slowdown in container shipping demand, which led the company to lower its projections for the full year. Maersk has lowered its outlook for the growth of 2022 demand to between -2% and -4%, down from the previous estimate of +1% to -1%. The downgrade stems from the unfolding economic slowdown, which it expects will continue into the coming year. Freight rates had started to decline in the third quarter, due to weakening customer demand and easing of supply chain congestion. Container volumes carried by Maersk in the first nine months were 7% lower. That was roughly in line with other liner operators such as Cosco Shipping of China and Japan’s Ocean Network Express, which have seen volumes drop by between 8% and 10%.

“The positive aspect of the normalization of markets is that lower demand will allow global supply chains to progressively improve,” Skou said. Lower volumes have fed through to contract rates, which are slightly lower than expected. The sharp fall in spot freight means new contracts will probably be negotiated at lower levels. “Obviously we are negotiating contracts in a different environment to a year ago, so it’s a fair assumption we will see lower rates,” Skou said. Maersk has more than 1.9m 40-foot equivalent units (feu) signed on multi-year deals. The share of long-haul contract volumes remained flat at 71%. But the company has reduced its guidance for average contract rates this year to $1,700 per feu, down from $1,900 per feu. The company reported its 16th consecutive quarter with year-on-year earnings growth. It posted a profit of $8.9bn for the third quarter, up from $5.5bn a year earlier. That doubled profits to $24.2bn for the first nine months. However, the coming period is likely to be “a more volatile business environment”, according to Skou. “With the war in Ukraine, an energy crisis in Europe, high inflation and a looming global recession, there are plenty of dark clouds on the horizon,” he said. “This weighs on consumer purchasing power, which in turn impacts global transportation and logistics demand.”

Revenues increased by $6.2bn to $22.8bn in the third quarter, due mainly to a $4.9bn rise in earnings in the Ocean division. Ebitda increased to $10.9bn and Ebit rose to $9.5bn, up 60% from the same period last year, driven mainly by significantly higher contracted freight rates and shipment on routes from Asia to Europe and from Asia to North America. Global container volumes declined 3% year on year. “As anticipated all year, earnings in Ocean will come down in the coming periods,” Skou said. “As we see, there is no crystal ball to predict timing entirely, but we have been anticipating normalization and we are prepared to meet it.” Boxship demand is expected to contract, but uncertainty remains high. The likelihood of growth ending up in the lower range of Maersk’s guidance is more likely, given the macroeconomic backdrop risks. Supply-side bottlenecks remain prevalent, but there are signs of easing, Maersk said.

Danish analyst SeaIntel’s data shows that the share of the global container fleet absorbed by delays decreased from a peak in January 2022 of almost 14% to a still elevated 8% in September. Maersk has maintained its full-year guidance for underlying Ebitda of around $37bn, an underlying Ebit of about $31bn and a free cash flow of more than $24bn. Capital expenditure guidance for 2022-2023 remains unchanged at $9bn to $10bn.

Grain exports from Ukrainian sea ports have been halted today as the security situation in the Black Sea remains tense following Russia’s decision over the weekend to suspend its participation in a regional shipping initiative. In the wake of an attack on its navy in Crimea on Saturday, Russia announced it would no longer be part of the Black Sea Grain Initiative. However, Ukraine, the United Nations and Türkiye vowed to carry on regardless, with ships departing and entering Ukrainian sea ports on Monday and Tuesday. The coordinators of the grain shipping deal took the decision to halt shipments today but remain hopeful that much needed grain exports can resume shortly with the UN coordinator for the Ukraine Black Sea grain deal, Amir Abdulla, saying he expects loaded ships to depart Ukrainian ports on Thursday.

Recep Tayyip Erdogan, the Turkish president told his Russian counterpart, Vladimir Putin, that he was “confident” the issue of grain exports from Ukraine could be resolved in a phone call yesterday. Putin replied, saying he wanted Kyiv to give “real guarantees” that it was “not using the humanitarian corridor for military purposes”, a Kremlin statement said.

Ship operators, security experts and insurers have voiced concerns that ships could become collateral damage as Russia looks to take out port infrastructure. Guy Platten, secretary general of the International Chamber of Shipping, commented: “We hope that a solution can be found that ensures grain continues to move out of Ukraine, and that all those involved in its movement can be reassured about their safety.” Platten stressed it was “imperative” that ships already in the grain corridor do not become collateral damage and are allowed safe passage.

Ukrainian authorities reported on Monday two tugboats carrying a barge full of grain were hit near the port of Ochakiv with two crewmembers killed. The port is not one of the three in the UN-brokered grain shipping deal, but nevertheless underscores the risks vessels face in the region. With Russia walking away from the deal, security consultants Dryad Global have warned in a new report that the risk to vessels and crews from commercial interruption and risk to safety are considerably enhanced across the short to medium term. “In the event that either Ukraine continues to mount successful large-scale attacks against Russia in the maritime domain, or that Russia cannot be negotiated back into the parameters of the initiative, it is highly likely that Russia will seek to severely limit Ukrainian maritime capacity including the likelihood of significant attacks on key Ukrainian export terminals,” Dryad Global suggested.

The deal to export Ukrainian grain lasts for 120 days and is due for renewal on November 18.

South Korea and Japan see strong steel exports in October

South Korea and Japan both saw strong steel exports in October. Japan exported 1.4 MMT, a 53.0% YoY increase, and South Korea 1.7 MMT, an increase of 19.5% YoY. Both countries have experienced a rapid devaluation in their currencies, with the Japanese Yen falling 28.4% against the dollar to JPY 147.8 and the Korean Won by 18.4% to KRW 1,421.7 in the last 8 months. As a result, Japanese and South Korean steel has become more competitive on international markets.

Mills are also turning to exports due to lower domestic demand. Steel demand is forecast by WorldSteel to fall by 2.5% in S. Korea and grow by only 0.2% in Japan in 2022. Weaker currencies have increased input costs, which is being passed onto consumers. Inflation and supply chain constraints have also hit the steel-intensive automobile, construction, and manufacturing sectors in both countries.

With tighter margins and exports not fully compensating for reduced domestic consumption, steel production has also fallen in both countries. According to WorldSteel Japanese output fell 6% YoY in the first 9 months of 2022, at 67.8 MMT. South Korean output totaled 50.5 MMT over the same period, a reduction of 4.4% YoY. Most steel was sent to other markets in Asia, including China, Thailand, and Vietnam. A significant portion was also exported to the US; 300k tonnes from Japan and 250k tonnes from S. Korea. Combined, this represents an almost four-fold YoY increase in US steel imports.

Coal exports remain slow from Eastern Australia

The pace of coal liftings out of Eastern Australia remained slow in October, averaging 888k tonnes per day, decreasing by 10% YoY. Coal mines in Australia’s eastern regions have continued to be hit by heavy rains amid the third La Nina season in a row, causing significant flooding that has hampered output. This caused an initial slowdown in exports in June 2022 and volumes are yet to recover to normal levels. Maintenance on key freight railways in Hunter Valley has further disrupted deliveries to ports in October. Another closure is planned for 22-23 November.

Industrial action is also threatening exports, with unions in several mines and preparation plants recently voting in favor of strikes, although any have yet to take materialize. These disruptions have caused an uptick in vessel congestion. There are 77 vessels currently waiting in Eastern Australian anchorages, including 20 Capes, 48 Panamaxes, and 9 geared ships. This is 12% above the one-year moving average.

South Korea and Japan see strong steel exports in October

South Korea and Japan both saw strong steel exports in October. Japan exported 1.4 MMT, a 53.0% YoY increase, and South Korea 1.7 MMT, an increase of 19.5% YoY. Both countries have experienced a rapid devaluation in their currencies, with the Japanese Yen falling 28.4% against the dollar to JPY 147.8 and the Korean Won by 18.4% to KRW 1,421.7 in the last 8 months. As a result, Japanese and South Korean steel has become more competitive on international markets.

Mills are also turning to exports due to lower domestic demand. Steel demand is forecast by WorldSteel to fall by 2.5% in S. Korea and grow by only 0.2% in Japan in 2022. Weaker currencies have increased input costs, which is being passed onto consumers. Inflation and supply chain constraints have also hit the steel-intensive automobile, construction, and manufacturing sectors in both countries.

With tighter margins and exports not fully compensating for reduced domestic consumption, steel production has also fallen in both countries. According to WorldSteel Japanese output fell 6% YoY in the first 9 months of 2022, at 67.8 MMT. South Korean output totaled 50.5 MMT over the same period, a reduction of 4.4% YoY. Most steel was sent to other markets in Asia, including China, Thailand, and Vietnam. A significant portion was also exported to the US; 300k tonnes from Japan and 250k tonnes from S. Korea. Combined, this represents an almost four-fold YoY increase in US steel imports.

Coal exports remain slow from Eastern Australia

The pace of coal liftings out of Eastern Australia remained slow in October, averaging 888k tonnes per day, decreasing by 10% YoY. Coal mines in Australia’s eastern regions have continued to be hit by heavy rains amid the third La Nina season in a row, causing significant flooding that has hampered output. This caused an initial slowdown in exports in June 2022 and volumes are yet to recover to normal levels. Maintenance on key freight railways in Hunter Valley has further disrupted deliveries to ports in October. Another closure is planned for 22-23 November.

Industrial action is also threatening exports, with unions in several mines and preparation plants recently voting in favor of strikes, although any have yet to take materialize. These disruptions have caused an uptick in vessel congestion. There are 77 vessels currently waiting in Eastern Australian anchorages, including 20 Capes, 48 Panamaxes, and 9 geared ships. This is 12% above the one-year moving average.

The safe passage of bulkers carrying Ukrainian grain through the Black Sea corridor is set to continue in leaps and bounds and won’t be tenable in the long term without Russian backing, UN officials warned. In the strongest sign yet that the Russian withdrawal from the scheme is starting to bite, the UN’s Joint Coordination Centre (JCC) in Istanbul announced on Tuesday that no ships would move through the corridor the following day. “Movements and inspections carried out after the Russian Federation suspended its participation in implementation activities at the JCC is a temporary and extraordinary measure,” the UN body explained in a statement on its website. “The JCC can best deliver on its mandate with the full and active participation of all four delegations.” In another, seemingly unrelated problem, the JCC announced it had to suspend inspection of two outbound vessels “due to issues related to fumigated cargo”.

More than 60 ships were inspected or allowed to travel through the corridor since Russia announced suspending its participation in the scheme on 29 October. The last vessels loaded with Ukrainian grain to undertake the journey on Tuesday were the 56,000-dwt SSI Challenger (built 2004), the 4,200-dwt Bomustafa O (built 1995) and the 11,300-dwt Nimet Torlak (built 2003). Developments so far confirm previous estimates by shipping sources to TradeWinds that the existing stock of vessels in the pipeline would likely complete their voyages, one way or another. As long as Russia stays away from the scheme, however, the sources added, it remains unclear how dozens of inbound vessels awaiting inspection in Istanbul or having recently applied to take part in the lucrative scheme would be able to join. “It is unclear whether the [Black Sea Grain] Initiative will continue to function and what form this will take,” maritime security intelligence firm Dryad said in a report on Tuesday, adding that the JCC will likely have to inform Russia of impending movement plans on a day-by-day basis.

Security concerns are already causing major insurers to stop covering the trade. Marcus Baker, a senior official at insurance broker Marsh, said on Tuesday that just few underwriters would take on the heightened risk in the face of the belligerent rhetoric out of Moscow. “Going forward, if ships haven’t already arranged cover, then, frankly, I think it will be very difficult for them to be able to that,” Baker told the BBC. Insurer Ascot, which teamed up with Marsh on providing $50m in cargo cover for Black Sea shipments, said it would not quote on new business for the trade until the situation becomes clearer. Russia suspended its participation in the UN-led Black Sea Grain Initiative after a Ukrainian drone attack on its war fleet on Saturday in the annexed city of Sevastopol, Crimea. Moscow said that the drones used the corridor to approach their target, demanded guarantees from Ukraine that it will no longer use the corridor for military purposes and warned that any further grain exports without such guarantees will no longer be safe. Russia has long had misgivings about renewing the safe passage scheme, which is due to expire on 22 November, arguing that the West failed to deliver on pledges to lift some economic sanctions that would facilitate Moscow’s own agricultural exports. According to analysts, it is that second concern that weighs more heavily on Russian minds. “It is assessed that Russia’s primary intent is to ensure the export of Russian fertilizer products and secure sanctions reprieve for such products,” Dryad wrote.

According to the latest UN data, 9.73 MMT of grain and foodstuffs were moved from the Ukrainian ports of Odesa, Chornomorsk and Pivdennyi since the initiative began on 1 August. The scheme revived Ukraine’s seaborne grain shipments, which had collapsed to near zero after Russia invaded on 24 February. According to UNCTAD, Ukrainian exports reached between 40% and 50% of their pre-war level. Clarksons said the share was even higher from mid-September to late October, running at 85% of pre-conflict levels. Ukrainian grain exports are seen as crucial to keep international food prices low and alleviate hunger in least developed countries. According to UNCTAD, however, poorer countries have directly received less than half of all wheat and about a third of all maize carried thanks to the scheme.

Since the February 24 invasion, Russia has allowed grain exports out of Ukraine facilitated by a July deal to mitigate the probability of a global food crisis. After an attack on its Black Sea fleet, Russia revoked its participation in the deal as it could not “guarantee safety of civilian ships”.

In 2021, Ukraine grain exports amounted to ~35.7 MMT, constituting ~40% of total bulk exports out of the country over an average sailing distance of ~2.900nm. Relative to the global seaborne grain trade in 2021, Ukrainian exports constituted ~6.5% of volumes and ~3% of tonne-mile demand, illustrating relatively short distances for exports.

After the invasion, grain exports fell to zero, but quickly recovered to ~1.5 MMT in September (~18.5 MMT annualized). The revocation of Russian participation in the Ukrainian grain export deal is ultimately bearish for dry bulk shipping volumes, but secondary effects of sourcing from further afar could counter the negatives as we have already seen volumes decline ~60% compared to the 2021 total as of September.

Wheat prices jumped 6% on the news, with the December wheat contract hitting USD8.93 a bushel.

Ukraine’s grain exports were running at 85% of pre-conflict levels prior to Russia’s decision to suspend its participation in the UN backed Black Sea Grain Initiative. Volumes shipped under the initiative have totaled over 9 MMT since the start of August, according to data compiled by Clarksons. Shipments had been running at 1.1 MMT per week from mid-September to late October vessel movement data showed. Prior to Russia’s invasion, Ukraine had a 10% share of global seaborne grain exports with 50 MMT out of a total 528 MMT of grain moved by sea in 2021. “Exports under the initiative so far have been shipped from the ports of Chornomorsk (37%), Odessa (37%) and Yuzhny (25%), while major destinations have been Turkey, China, Egypt and Mediterranean EU countries including Spain and Italy,” said Clarksons.

Handysize vessels have carried the largest share of volumes since start-August of around 44%, with Handymax’s carrying 29% and panamaxes 26%. The average age of vessels involved so far has been 16.9 years versus 11.5 years for the wider bulk carrier fleet, Clarksons said. “Ukrainian seaborne grain exports typically reach seasonal peak levels in either the third quarter following the wheat harvest in the region or the fourth quarter following the corn harvest, and with storage levels extremely high given the effective suspension of exports across February-July, had the potential to pick up further in the coming months,” said Clarksons.

The deal was due for renewal in November for a further 120 days. “Russia’s suspension of involvement in the initiative on 29th October has led to major uncertainty around shipment volumes and vessel movements. “Even in the short-term, though a convoy of laden vessels sailed from Ukrainian ports on 31st October, and Turkish and UN delegations have so far continued to provide inspection teams in order to continue fulfilling the initiative,” the broker added.

Monday saw a record volume of 354,500 tons of agricultural products carried on vessels leaving Ukraine ports under the initiative, a spokesman for Odessa’s military administration, was quoted as saying by Reuters. Russia said on Saturday that it was pulling out of the deal after what it said was a “major Ukrainian drone attack” on its fleet in Crimea.

Ocean Network Express (ONE) chief executive Jeremy Nixon expects the container market to reach equilibrium in 2023, claiming the steady decline in rates is a result of demand dropping faster than supply can be adjusted. However, ONE’s profit forecast for the next two quarters predicts some painful months ahead for the box sector. On Monday, ONE reported a profit of $5.52bn on revenue of $9.37bn for the second quarter of its 2022 financial year, which ended on 30 September. These figures are like the first quarter. During the first half of its 2022 financial year, the Japanese-owned, Singapore-headquartered liner giant brought in a total profit of $11bn on revenue of $18.39bn, a 67% increase from the $6.76bn profit in the first half of 2021.

ONE noted that despite the sudden decline in transport demand that began in August and September, freight rates remained higher throughout the second quarter than the same period last year. It predicts that, compared with the first half of the year, profits will plummet by almost 62% to $4.24bn on reduced revenues of $11.53bn in the second half. In short, the revenue it expects to bring in during the second half is about the same as the profit it earned during the first half. Nixon blamed the deteriorating market conditions plaguing the liner sector on the global economy continuing to come under pressure from high energy costs, rising interest rates and inflation, while at the same time supply chain bottlenecks are still affecting some geographies and industry sectors. “A case in point is the latest Ningbo city lockdowns in China and continued inland rail congestion in the US. Overall, though, inland and port logistics fluidity continue to improve,” he said. “Consumer confidence is, however, more subdued, and some retailers have reduced their current purchase orders whilst sitting on higher levels of inventory.”

Nixon added that October is structurally a relatively weak month because of Golden Week holidays in China that, together with the wider weaker confidence in consumer sales, led to a drop in booking demand across several key trade lanes. “This has led to a sharp correction in spot market rates, due to overall demand dropping quicker than the market can adjust supply side capacity,” he said. On a more positive note, Nixon expects this situation to change over the next quarter as the market moves back closer to equilibrium, albeit at lower market volumes and rate levels compared with this time last year. “Inevitably surplus inventories will need to get cleared out to accommodate the influx of seasonal specific commodities and purchase orders for the next calendar year,” he said.

During the first half of its financial year, ONE signed contracts for 10 VLCC newbuildings of around 13,700 teu each with Hyundai Heavy Industries and Nihon Shipyard. These vessels are to be delivered in 2025. In addition, the company took delivery of two long-term chartered 12,000-teu newbuildings. ONE is jointly owned by Mitsui OSK Lines, K Line and NYK Line. The impact of its strong second quarter was positively felt on MOL’s second quarter, the results of which were also announced on Monday. The Japanese shipping conglomerate reported a strong second-quarter net profit of ¥315.7bn ($2.13bn), of which ONE contributed ¥260.3bn. MOL earned a net profit of ¥601bn during the first half of its financial year, beating its previous forecast of ¥500bn. Of that amount, ¥494.6bn was contributed by ONE. In other market segments, MOL said that while the capesize bulker segment “did not meet the previous forecast announced at the end of July, reflecting the deteriorated market”, overall profit increased from the first half of the previous fiscal year, supported by the profit from medium to long-term contracts. Profits also increased in the smaller bulker, woodchip carrier, car carrier, crude and product tanker, terminal and logistics, ferry, and cruise segments due to favorable market conditions such as strong cargo demand, the lifting of Covid-19 restrictions and an increase in tonne-miles for tankers because of the sanctions on Russian oil. ONE’s downward forecast for its second half saw MOL reduce its second-half forecast from ¥200bn to ¥188.5bn.

Norden has responded to market talk of another investor pay-out by confirming a dividend for the third quarter. The Danish bulker and tanker operator has yet to report its latest earnings figures. But it issued a statement saying it had been made aware “that there is information circulating in the market concerning a potential dividend pay-out of DKK 25 [$3.33] per share in connection with the upcoming Q3 result”. The company confirmed that there are “ongoing internal considerations” related to a dividend. The amount, however, will be decided at the ordinary board meeting on 3 November. “The company has no further comments,” Norden said.

In August, the operator declared an interim dividend of DKK 30 per share, which it said was based on the “strong cash flows and favorable earnings outlook”. It also started a new $40m share buyback programme that runs from 18 August until 1 November.

Earlier in October, the company said it was expecting an even bigger profit for 2022 due to ship sales and market strength.

Norden has upped its earnings estimate five times this year. Annual profit is expected to range from $650m to $730m, up from between $560m and $640m previously. A spokesperson told TradeWinds the hike was due to a “good mix” of factors. Part of the amount relates to some profitable vessel transactions, selling tankers against a background of high asset prices, the spokesperson said.

Good timing on some bulker sales has also helped, “where the asset market has still held up all right for now, despite the recent slowdown”. And the more short-term operator business, Freight Services & Trading, is making good use of a fair amount of tanker exposure to the spot market.

The Copenhagen-listed firm has already made more net profit in the first half of 2022 than it did during 2021. Norden’s bottom line hit $178.7m for the second quarter, compared with $31.8m a year earlier.