Yang Ming president Patrick Tu believes the lifting of China’s Covid-19 restrictions could stimulate consumption – although freight rates have fallen substantially since mid-2022.
He told a media briefing on Monday the looming Chinese New Year, which falls on 22 January, had temporarily halted the slide, as Asian exporters rushed to get goods out before the holiday factory shutdown.
“There are too many positive and negative factors,” he said. “Last year was the best ever for the container shipping industry, in terms of profits. This year cannot be better, but it is still uncertain how much rates will come down. At current freight rates, Yang Ming is still making money.”
From January to September last year, Yang Ming’s net profit was $5.69bn, up 51% year on year, Mr Tu said, adding: “The shipping industry has made great profits in the past two years, mainly because capacity has been quite uneven and this drove up freight rates.”
Now, he said: “New environmental protection laws and regulations mean more restrictions on the speed and the supply of ships on the market. Once the supply decreases, it will help balance the supply and demand of shipping capacity.
“Inflation is affecting the global economy and the Russia-Ukraine war continues, affecting purchasing power. In the past, when we spoke about the outlook at the start of a year, we’d use ‘cautiously optimistic’ and ‘conservative’, but 2023 can’t be compared with 2022.
“How much will freight rates decline? Will freight levels go down to a point where there’s no profit? I daren’t say, because I can’t see, and the changes are too fast.”
Mr Tu believes China scrapping its zero-Covid policy could stimulate consumption, although it was possible that lockdowns could be reinstated if there were flare-ups, he added.
He said: “It’s premature to be certain that the removal of the zero-Covid policy will rejuvenate the Chinese economy, due to the early Chinese New Year. However, if consumer spending surges, there will be benefits for shipping.”
