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Q2 Container Line Earnings May Beat Expectations

Although Q2 container line earnings results will not be released until next month, there are early indications that suggest that they have managed to reduce losses, at least in the near term.

Matson, a niche carrier based in Hawaii, recently announced its preliminary results for Q2 2023, projecting a net income between $76.3 million and $81.5 million. This is more than double the net income they recorded in Q1 2023, which was $34 million. Matt Cox, the CEO of Matson, confirmed that their China service experienced higher demand in Q2 compared to the previous quarter.

Analyst Ben Nolan from Stifel praised Matson's performance, describing it as a "remarkably good quarter" with earnings nearly double the expectations of both the analysts and the market. Asian ocean carriers are also indicating a stronger second

quarter than anticipated.

China's Cosco, the world's fourth-largest carrier group, reported a preliminary net income of 12.5 billion yuan ($1.7 billion) for Q2 2023, showing a 76% increase from Q1 2023.

However, Cosco subsidiary OOCL's results were less optimistic. Although they performed better than previous quarters and pre-COVID, they still experienced a decline. Q2 2023 revenues were $1.98 billion, up 35% from Q2 2018 and 26% from Q2 2019. Nevertheless, there was a 9% sequential decline from Q1 2023, and the quarter-on-quarter drops in the previous two periods were much steeper (33-37%).

Despite these positive developments in some companies, the consensus for the second half of the year is becoming less optimistic. Many carrier executives had earlier predicted a recovery in the second half, with inventory restocking and pre-Christmas bookings expected to improve performance. However, there are now doubts about this prediction.

Matson's CEO, Cox, expects a muted peak season in the China-U.S. trade lane. Nevertheless, he remains cautiously positive, stating that trade dynamics are expected to gradually improve throughout the year, barring a severe economic downturn in the U.S.

Taiwan's Evergreen Marine had been experiencing declining revenues since Q3 2022, but the trend reversed in the latest quarter, with Q2 2023 revenues increasing by 1% compared to Q1 2023. Additionally, Q2 2023 revenues were 43% higher than the same period in 2019, before the pandemic.

According to a report from Chinese news outlet Xinder Marine News, Evergreen Marine Chairman Chang Yen-I noted that the traditional peak season in the third quarter may be postponed.

On the other hand, Zim, an Israel-based company, has lowered its full-year earnings guidance on July 12. CEO Eli Glickman stated that while their Q2 results were in line with expectations, they no longer anticipate an improvement in freight rates in the second half of 2023, as previously assumed, due to seasonal factors. Zim believes that demand will remain subdued for the rest of the year.


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