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Shipping companies enjoy positive earnings thanks to high sea freight rates

Since July 2020, sea freight rates worldwide have begun to increase sharply

Record-high sea freight rates have seen shipping companies produce positive second-quarter earnings reports.

The VN-Index gained 41.22 points last week, or 3.25 percent to close at 1,310.05 points after three consecutive weeks of decline. Total trading value on the Ho Chi Minh Stock Exchange (HOSE) fell 7.3 percent to 84.9 trillion VND (3.7 billion USD).

Shares of the Hai An Transport & Stevedoring JSC (HAH) increased 12.06 percent, Vinaship JSC (VNA) rose by 11.17 percent, Duyen Hai Multi Modal Transport JSC (TCO) 6.98 percent, Vietnam Ocean Shipping JSC (VOS) 6.29 percent, Petrovietnam Transportation Corporation (PVT) 5.11 percent and Pacific Petroleum Transportation JSC (PVP) 4.17 percent.

In the second quarter, the Hai An Transport & Stevedoring JSC (HAH) recorded a 72 percent increase in net revenue compared to the same period last year, reaching 449.3 billion VND with a net profit of 97.7 billion VND, up 150 percent.

In the first six months of the year, HAH’s revenue reached 808 billion VND and post-tax profit recorded more than 183.2 billion VND, up 49 percent and 161 percent, respectively. With this result, HAH only fulfilled 49 percent of its revenue target but surpassed its profit target by 16 percent.

The Petrovietnam Transportation Corporation (PVT) also reported Q2 revenue of 1.87 trillion VND, a slight increase over last year. Post-tax profit rose by 8 percent to 256.5 billion VND. In the first half of this year, PVT collected 3.6 trillion VND in revenue, completing 60 percent of its yearly plan and 438.9 billion VND in post-tax profit, exceeding 8.6 percent of its yearly plan.

The net revenue of the Vietnam Ocean Shipping JSC (VOS) decreased slightly compared to the same period last year, reaching 325 billion VND, but post-tax profit was 242 billion VND. During the same period last year it suffered a loss of 32 billion VND.

In six months, VOS recorded revenue of 580 billion VND, down 15 percent year-on-year and fulfilling 47 percent of the yearly revenue target. Post-tax profit reached 222 billion VND, 7.4 times higher than the yearly plan, while in the same period last year it lost 118.2 billion VND.

Last week, shares of the Seagull Shipping Company (SSG) increased by 25.93 percent, from 5,400 VND per share to 6,800 VND per share. In the June 9 session, SSG suddenly hit the daily limit rise of 12.5 percent, starting a series of rising prices in the sessions that followed. Since its listing so far, SSG has increased by 183.3 percent.

At the annual general meeting of shareholders in 2021, the company submitted a business plan to shareholders with total annual transportation revenue of 23.4 billion VND and an after-tax loss of 200 million VND. However, 32.85 percent disagreed and asked the company to adjust revenue to 24.9 billion VND and post-tax profit to 1.3 billion VND. SSG has adjusted the plan accordingly, but so far the company has not announced its second quarter results.

Shares of Transport And Chartering Corporation (VFR) also increased by 20.45 percent during the week, rising from 4,400 VND per share to 5,300 VND per share.

Recently, VFR announced Q2 revenue of 37.4 billion VND, down slightly over the same period last year. Post-tax profit still reached 7.8 billion VND while in the same period last year it lost 7.4 billion VND.

In the first six months, VFR’s net revenue reached 78.6 billion VND, down 5.1 percent year-on-year. Post-tax profit was 1.3 billion VND while it lost 21.9 billion VND last year.

Shares of Transportation and Trading Services Joint Stock Company (TJC) also recorded growth of 17.02 percent last week.

In the second quarter, TJC’s net revenue reached 33.8 billion VND, up 42 percent, post-tax it was 3.1 billion VND. In the first six months, the company recorded revenue of 62.9 billion VND, up 22.1 percent. Post-tax profit reached 4.7 billion VND, 899 times higher than the same period last year. With the yearly target of pre-tax profit of 2.5 billion VND, the company has exceeded its plan for the whole year.

Since July 2020, sea freight rates worldwide have begun to increase sharply.

According to The Vietnam Maritime Administration, the sea freight rate (including surcharges) from Vietnam to the US for the highest 40 feet container is 14,250 USD per container, the lowest is 8,000 USD per container. So far, there have been at least four upward adjustments, 14 times higher than at the beginning of 2020.

The World Shipping Council (WTC) previously said that it would be difficult to determine when shipping costs will peak as global demand has not yet fully recovered.

SSI Research said that there were many factors affecting the shipping market. Some factors were temporary while others were quite long-term and will not change anytime soon.

“This means that an escalation of short-term factors could push freight rates to new highs, but are not sustainable in the long-term,” it said.

Accordingly, SSI forecasts that freight rates may peak in the fourth quarter of 2021, then adjust slightly in the first half of 2022.

“Freight rates may decrease significantly in 2023 when the supply of new ships comes into operation, but will maintain a higher level than before the COVID-19 pandemic as carriers gain more experience in supply management and increase cooperation,” it said.

VNA