Time out for the Taiwanese Trio???

IS IT TIME OUT FOR TOP 3 Taiwanese shipping companies? 

Yes, time is running out for Taiwanese shipping majors! Taiwan’s top three container lines reported worst ever Q1 results as they became the latest carriers to suffer from a market defined by weak demand and massive overcapacity that has pushed down freight rates on the world’s major trade lanes.

Wan Hai - World's most profitable carrier barely manages to avoid losses
Profit at Wan Hai Lines fell 22 percent, but the intra-Asia carrier was able to avoid falling into the red. Net profit at Wan Hai fell to 42.99 million Taiwanese dollars ($1.3 million) in Q1. Wan Hai last year was the world’s most profitable container line by profit margin.

Losses all the way for Yang Ming & Evergreen
Yang Ming’s profit collapsed in the first quarter with a loss of 3.66 billion Taiwanese dollars against a profit of 303 million Taiwanese dollars in the same period last year. Revenue dropped 18.2 percent year-over-year to 27.1 billion Taiwanese dollars.

Revenue at Evergreen fell 18.9 percent year-over-year in the first quarter to 28.6 billion Taiwanese dollars. The carrier's operating income swung to a loss of 3.8 billion Taiwanese dollars from a gain of 1.8 billion Taiwanese dollars in the same quarter of 2015. 

OVERCAPACITY IN CONTAINER SHIPPING !

Severe Overcapacity is one of the driving forces behind the liner shipping co.s' troubles, and managing capacity, which worldwide will break the 20-million-TEU barrier in a matter of months, would be at the center of an industry recovery.

As demand is not expected to grow at a pace needed to match the capacity of new ships entering the fleet, extensive idling of the modern and efficient ships in the fleet, and continued demolition of the inefficient ships will improve the market both in the short- and mid-term. For the longer-term management of capacity, a low level of contracting for newbuildings must be maintained. 2016 is off to a good start on all these parameters.

LIGHT @ THE END OF THE TUNNEL?

Merger options?
There are proposals that Yang Ming merge with another shipping firm or a shipping-related service operator like Taiwan International Port Corp (TIPC).  It might be difficult to merge it with the nation’s largest shipping firm, Evergreen Marine Corp (長榮海運), as one is a state-run company and the other is a privately owned firm.
A merger between Yang Ming and TIPC would be more viable, with the latter also being a state-run firm that operates seaports

Wan Hai has already rejected the idea of mergers. Shipping lines like RCL, OOCL and Evergreen might look at merger options in the near future considering the challenges being faced by the container shipping industry.

Taiwanese Govt relief package

Taiwanese Govt. came to the rescue of Taiwanese Shipping Lines. Earlier in November 2016, Taiwan’s government approved a $1.9 billion relief package to Taiwanese companies Evergreen Marine and Yang Ming Marine Transport, two of the world’s biggest container operators.

Evergreen and Yang Ming, the two shipping lines that move the majority of Taiwan’s exports, have posted a combined loss of more than $580 million thus far in 2016. A possible merger between the two companies was halted due to the fact that they belong to competing global shipping alliances.

Both Evergreen and Yang Ming are considered integral to the country's economy, and are receiving credit lines with an interest rate of approximately 2.9%.

GLOBAL ECONOMIC DOWNTURN - 

SURVIVAL OF THE FITTEST!

The long-running global economic downturn having left the industry drowning in excess capacity. With growth refusing to budge and consumer demand still slack, the world’s freight carriers have more ships than they can fill — a quarter of cargo space lies empty. 

It will be the survival of the fittest in Container Shipping & also lines that are fastest to adapt by either mergers or an exit/sale will survive.... unless and until they really want to go the HANJIN WAY !!!