1 May 2024 (Lloyd's List) - OCEAN carrier Matson has raised its annual guidance and foresees higher rates and volumes in the transpacific due to resilient US demand.
Matson said after market close on Tuesday that it “expects full-year 2024 ocean transportation operating income to be higher than the $294.8m achieved in 2023”. It did not specify by how much, but said it is “higher than the previous outlook” released on Feb. 20.
Seasonal momentum is mounting. The company predicted that its second-quarter ocean transportation operating income will be more than triple first-quarter levels.
‘US consumers continue to hang in there’
Matson provides regional services to Hawaii, Alaska, and Guam, as well as expedited, premium-priced services from China to the US.
The company’s NYSE-listed stock is one of the best performing equities in any shipping segment. Its adjusted closing price recently flirted with highs seen during the pandemic boom.
Matson executives now believe that both average freight rates and volumes for the company’s China-US services will be higher in 2024 than in 2023.
“If you look at volumes into the west coast, we’re seeing growth year over year for all of the international carriers,” said Matson CEO Matt Cox on the conference call.
“US consumers continue to hang in there. The economy is still plugging along. In the absence of some significant disruption, which we don’t foresee, we’re going to continue to see strong and steady consumer demand.”
The Red Sea effect is a key topic in the industry: how Red Sea diversions are impacting container rates and supply chains, and how complications for imports to the US east coast might push more cargo to the west coast.
But Cox downplayed the effect of Red Sea diversions.
“What we have seen is that for carriers that traditionally used the Red Sea and Suez Canal, capacity has gone around Africa – and it has been relatively painless from a customer supply chain perspective. We haven’t seen much disruption as an industry,” he said.
Rerouting of cargoes to the west coast “has been very much on the margin, in the single digits, so relatively small in terms of its impact on Matson”, he added.
A return to normal seasonality
Matson reported net income of $36.1m for Q124 versus $34m in Q123. Ocean transportation revenue came in at $579m during the latest period, up 5% year on year.
Average freight rates in Matson’s China-US service increased year on year, but container volumes for these services declined 4%.
Ocean transportation operating income was $27.6m in Q124, and Matson said it will be “moderately higher in Q224 versus Q223”. In Q223, its ocean transportation operating income was $82.4m, implying a very large sequential jump in the second quarter of this year versus the first.
“What we’re seeing is a more traditional first quarter, and by that I mean there was a little bit of a longer period of ramping back up after the Lunar New Year holiday,” explained Cox.
The post-Lunar New Year reopening was “more accelerated” in Q123.
“I think 2024 has been the first year since the pandemic that we’ve seen a longer period as factory workers went to their homes in the provinces and didn’t need to rush back and fill orders.
“Traditionally, the first quarter is the weakest quarter in our business, and I think we’re returning to that. It feels like there is going to be normal seasonality moving forward.”
