Hello, it’s IINO.
I would like to broadcast IINO san’s Logistics Radio.
Today I would like to talk about, “ONE to invest $20 billion by 2030.”
Daily Logistics Radio by IINO san in 25th Mar. 2022
I will discuss ONE’s investment direction.
CEO of ONE, Ocean Network Express, Jeremy Nixon’s March 23 online business presentation was featured in the news.
In that statement, he said, “From FY2022 to FY2030, we will invest more than $20 billion in vessels, terminals, and digitization.”
ONE began service in April 2018, and although it posted a loss in its first year, it returned to profitability in the following fiscal year, 2019.
In FY2021, ONE expects to generate $15.398 billion in after-tax net income in the container freight market.
Top Class Profitability
Compared to the time of the three Japanese carriers, it has expanded its scale and pursued further efficiency, and are proud to be one of the most profitable container shipping companies.
ONE is certainly not cheap. However, I have the impression that major Japanese companies are choosing it. We offer our customers multiple route schedules, and they choose it.
Future Business Domains
Regarding business areas, the company will continue to focus on containership business.
The company clearly denied that it will expand into the logistics field, which Maersk, CMA-CGM, and others are pursuing.
It may be because the three Japanese shipping companies have the following logistics companies.
K Line Logistics
Global marine container transportation has grown at an annual rate of 6% over the past several decades, and ONE expects the trend of long-term growth to continue.
It is committed to continued investment in line with market growth.
Regarding core investments in vessels, as of December 31, 2021, it has 211 vessels with 1,542,702 TEU.
Although there will of course be some replacement of older existing vessels, the fleet size in operation in FY2030 is expected to be well over 2 million TEU.
MSC: 645 vessels with 4,284,728 TEU
Maersk: 738 vessels with 4,282,840 TEU
In TEU, ONE is less than half of MSC and Maersk’s share, so I think it is a quandary and will not be reached.
The current container freight rate market has been softening since the Chinese New Year, especially for Asia-bound shipments to Northern Europe and the Mediterranean.
Nixon pointed out that, “While there is certainly a softening trend, the decline is not as large as it has been over the past five years.”
Although the current soaring container freight rates will gradually come down, “we have a bright outlook for shipping companies in 2022,” he said.
He predicted that the high freight rate market will continue to some extent throughout the year.
For North American routes, where ONE is strong, retail inventory levels remain low and booking demand is strong.
Furthermore, the article concludes that there are major uncertainties, such as labor negotiations at North American West Coast ports.
Investment Policy of Each Company
The article describes how ONE will invest.
It is also investing in decarbonization, although not covered on the radio, so please see the overview section for more details.
ONE and MSC invest mainly in ships.
Here is my prediction about what will happen if more vessels are added in the future. I think not to return to low prices like pre-Corona, and the key word is digitalization.
Digitalization of Shipping Companies and Digital Forwarders
The obvious example is Maersk, which is expanding into logistics, so it can be managed digitally Door to Door. I think this is more convenient.
On the other hand, if shipping companies like MSC and ONE invest mainly in ships, this may be a place where digital forwarders can live.
Since there will be more ships, there will be more schedules.
Since the digital management will enable AI to forecast demand, if demand is low in a certain region, it may be possible to adjust the schedule by sending ships to another region.
Shipping itself will not disappear, but the way we interact with it will change.
I would like to keep you informed at all times.
That’s all for today. Thank you.