(March 17): Chinese and Taiwanese container liner earnings are showing how the industry is dealing with global ructions as the Iran war dims hopes of a Red Sea reopening and pushes up freight rates, a welcome break after a year of declining profits.
China’s Orient Overseas International Ltd and Taiwan’s Evergreen Marine Corp both reported steep drops in earnings as the prospect of a reopening of the Red Sea shipping route exacerbated oversupply issues that kept rates low for most of last year. Smaller Taiwanese liners Yang Ming Marine Transport Corp and Wan Hai Lines Ltd also saw earnings contract.
Now the momentum looks set to shift even as uncertainties linger. While container liners have significantly less exposure to the Strait of Hormuz than oil tankers, the escalating war has effectively dashed hopes for a full Red Sea reopening this year, though forecasting remains difficult.
“The closure of the Strait of Hormuz may lead to a disruption to the container sails and port congestion in other alternate ports, which could introduce upside risk to the shipping rate,” Goldman Sachs analysts including Herbert Lu wrote in a note.
Global liner rates rose 8.4% to US$2,123 per 40-foot container in the week ended March 12, the second consecutive week of growth after almost two months of declines, according to the Drewry World Container Index.
Asian container lines should expect sequential improvements in spot rates through the middle of the year, Citi analysts led by Kaseedit Choonnawat wrote in a note. That assumes a de-escalation of the conflict once US-Israel military objectives have been reached and a normalisation of energy costs.
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“Geopolitical developments are occurring with increasing frequency, and where any single event may take effect instantly and create far‑reaching ripple impacts, it has become increasingly difficult to forecast market trends with precision,” Orient Overseas said.
Disruption risk
Disruption from the war is roiling global supply chains, forcing liners to tackle everything from transit halts to soaring fuel costs.
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“Complex transshipment arrangements have also increased operational challenges,” Yang Ming said, noting reduced capacity on its Middle East routes. That places “additional pressure on port operations and increasing the risk of terminal congestion while pushing up insurance premiums and bunker costs.”
Cosco Shipping Holdings Co, China’s biggest carrier, and Evergreen Marine are among the Asian liners to have suspended Middle East bookings, joining global rivals including AP Moller-Maersk A/S, Hapag-Lloyd AG and CMA CGM SA. Cosco Shipping is due to report full-year earnings on March 19.
Still, they may have an edge over European rivals, according to Bloomberg Intelligence analyst Kenneth Loh, with their “cost leadership and aggressive scaling-up,” while European counterparts are prioritising schedule reliability and premium service offerings.
“So far, the strategy of the Chinese and Taiwanese liners appears to be serving them well, boosting their 2026 outlook vis-a-vis global peers,” Loh said.
Liners with a greater presence in Asia trade, particularly on China-dominated routes, could also benefit from China’s export resilience in recent months, according to Loh. Chinese exports rose faster than expected in the first two months of the year, before US and Israeli strikes on Iran. That’s also lifting freight rates and padding margins.
Although bookings in the Middle East have been suspended, the impact is not yet on the scale of the initial Red Sea crisis, said Judah Levine, head of research at cargo booking platform Freightos Group.
From a container perspective, only about 3% of global volumes pass through the Strait of Hormuz, Levine said.
That limited exposure could still turn into headwinds if the conflict drags on, said BI’s Lee A Klaskow. “If the strait is closed for more than three months, higher energy prices would be inflationary and destructive for demand.”
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