Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wallenius Wilhelmsen, the world’s biggest operator of car-carrying ships, has reported record annual profits as growing exports of Chinese electric vehicles helped drive demand.
The Norwegian company is the biggest participant in a corner of the shipping industry facing different dynamics from container lines, which are saddled with excess capacity. After scrapping vessels during the pandemic, car-carrier operators are expected to receive few new ships until next year.
Along with Scandinavian rival Höegh Autoliners and Japanese conglomerates NYK Line, MOL and K Line, WW dominates an industry that transports cars built in Japan, South Korea and China to markets in Europe and North America.
WW said on Wednesday that its net profits rose 22 per cent to a record $967mn last year as revenues climbed 2 per cent to $5.15bn.
Lasse Kristoffersen, chief executive, said the results for its core shipping services segment were “very much” driven by growth from China. “That’s Chinese exports increasing generally, of which electric vehicles are the strongest growing element,” he said.
Faced with slowing domestic demand, Chinese carmakers have set their sights on expanding in Europe and the US. China’s car exports in the final quarter of last year were up 17.7 per cent on the same period in 2022, a jump that WW said was driven by overseas sales of battery-electric vehicles. Overall demand to move vehicles by sea was up 11.8 per cent in the quarter.
Burgeoning exports from China come as car-carrier operators, in contrast to container shipping lines, face a lack of capacity after scrapping a significant number of vessels during the pandemic.
There are no significant ship deliveries due before 2025. WW currently operates 125 vessels, out of a worldwide car-carrier fleet of 767 ships.
Oslo-based WW predicted that its results for 2024 would be “somewhat stronger” than those for 2023, despite what it described as “uncertainties” over the Red Sea trading route.
Attacks on ships in the Red Sea by Yemen’s Houthis have led nearly all car-carrier operators to avoid the route and instead divert vessels around the Cape of Good Hope.
Since December, WW has been diverting ships that would normally sail via the Suez Canal via the Cape. The diversion adds about a week to Asia to Europe journey times.
Kristoffersen said that, unlike some other parts of the shipping industry, car-carrier lines had not been able to bring in spare, unused ships to maintain the same service frequency of services.
Other parts of the shipping industry have been able to charge customers extra after diverting via the Cape. However, Kristoffersen said car-carrier lines had mostly been unable to do so because most of their traffic moved under fixed-price, long-term contracts with carmakers.
While WW reported record profits for the whole of last year, its earnings before interest, tax, depreciation and amortisation for the shipping services segment for the fourth quarter were down 8 per cent from a year earlier to $392mn, while revenues slipped 9 per cent to $961mn.
The company blamed several factors including port congestion, the Cape diversions and the end of the lease on one ship for the declines. The group’s shares were 3.3 per cent down on Euronext in Oslo on Wednesday, but 12.3 per cent up on a month ago.
Read the full article here
