23 August 2023 (Lloyd's List) - ZIM is to remove capacity from its Oceania services as it continues to rationalise its business following a weak set of second-quarter results. Last week, Zim chief executive Eli Glickman said the line had acted to “rationalise our existing capacity and review our services to adapt our network to customer preferences and identify new commercial opportunities”.
That was reinforced this week when it announced it would suspend its three services between Asia, and Australia and New Zealand.
“Our current Oceania services network will be restructured, in co-operation with MSC, to enhance reliability and strengthen our customer offerings,” said Zim executive vice-president intra-Asia Danny Hoffman. “We are embarking on an exciting new phase in our Australia service, elevating the level of services provided.”
The Asia-Australia CAX service will be replaced by a new service, ZAX, which will run under a vessel-sharing agreement with Mediterranean Shipping Co on its Panda service.
“Under this new VSA, Zim will deploy three out of the seven 5,000 teu ships required to offer weekly sailings, while MSC will operate the other four,” said analysts at Alphaliner. “This is an upgrade from the current fleet of 2,600 teu–4,400 teu ships, all provided by MSC.”
Alphaliner also expects Zim will offer it two new loops through co-loading on two of MSC’s existing Southeast Asia-Australia/New Zealand loops, the Kiwi Express and Capricorn.
“In case of slot agreements only with MSC, Zim will need to find new employment for the 10 charter vessels of 2,500 teu-2,800 teu capacity made redundant by the closure of the CAX and TFX service,” Alphaliner said. “The ships could be used elsewhere on the Zim network or sublet in the charter market.”
Zim will be hoping to avoid redelivering any ships after taking a $51m charge in the second quarter following the return of four ships it had on charter. Analysts at Linerlytica said mounting losses at Zim, which last month warned it would likely make an operating loss of $100m-$500m for the full year, were forcing a rationalisation of its services.
“Zim recorded its worst quarterly loss since its financial restructuring in 2014, with the second-quarter net loss reaching $213m,” Linerlytica said. “Zim’s woes were exacerbated by its unfavourable trade mix, with the unprofitable transpacific and Intra-Asia (and Australia) routes accounting for 38% and 28% respectively of Zim’s total liftings, while it is underexposed on the Asia-Mediterranean, Atlantic and Latin America that were still profitable during the second quarter.”
Zim lifted 860,000 teu in the quarter, unchanged on a year ago. But rates plummeted to $1,193 per teu, 67% down on a year earlier, and 14% below the first quarter.
Vespucci Maritime chief executive Lars Jensen pointed out that while Zim’s volumes were positive against global volumes, meaning it had increased its market share, this had come at the cost of earnings. “Zim’s rate development has been significantly more negative than the market at large, while they have at the same time grown market share marginally.”
Earlier this year, Zim also closed its Asia-US west coast loops and is now focusing on its Asia-US east coast services instead. Alphaliner noted that this was where it hoped to recover its fortunes, using 10 LNG-fuelled 15,000 teu newbuildings that are due for delivery this year and next. The carrier’s market share on this route exceeds 10% and Zim expected to benefit from a competitive cost per teu on this trade after delivery.
