Challenging Markets Still Hurt MPC Container Ships’ Earnings

Challenging shipping markets continue to affect earnings of Norway-based shipowner MPC Container Ships which closed the second quarter of this year with a loss.

The company reported a net loss of USD 6.4 million in Q2 2019, compared to a profit of USD 1.8 million seen in Q2 2018.

“The container shipping industry continued to endure macroeconomic uncertainty in Q2 and H1 2019, one prominent contributor of which being the unpredictability surrounding the US-China trade tensions,” Constantin Baack, CEO of MPC Container Ships, explained.

“Adding to this were other geopolitical impact factors such as the potential risk of a global economic slowdown or the impending IMO 2020 low sulphur regulations,” he continued.

Operating revenues were USD 47.8 million in the quarter ended June 30, 2019, against USD 46.9 million posted in the corresponding period a year earlier.

During the second quarter, average time charter equivalent (TCE) rate was USD 9,071 per day, a drop from USD 9,240 per day recorded in Q1 2019.

As of March 2019, rates for the larger vessels have increased due to liner companies needing to cover trade routes while vessels are taken out of service for scrubber installations. Since scrubber systems are less frequently installed on smaller vessels, the dynamic has excluded feeder vessels from rate increases for most of Q2 2019, MPC Container Ships said.

In June, the company has commenced the installation of scrubbers on one of ten selected vessels and will continue with the installation on the remaining nine vessels during the second half of the year.

On August 15, MPC Container Ships exercised the option amounting up to USD 13 million under the loan agreement with Beal Bank. The funds will be used partly for the refinancing of AS Palina and AS Petra and partly for investments in scrubber installation of the two ships.

In the first half of 2019, the company declared a constructive total loss for vessel AS Fortuna after its grounding in September 2018. The vessel was sold and delivered to its new owner in June 2019.

Following the sale, MPC Container Ships owns a fleet of 68 container vessels of which 60 are fully owned and eight operated in a joint venture.

With regard to prospects on an overall macroeconomic level, MPC Containerships said the outlook for the remainder of the year and the first months of 2020 will remain influenced by issues relating to IMO, a complex economic situation as well as trade war risks.

However, the company said that demand-supply rebalancing might be realistic in the coming period.

“In a scenario of modest growth, even more limited demand growth combined with the effects of IMO 2020 still point towards a market rebalancing.”

“In times of uncertainty, a strong balance sheet and prudent leverage profile is vital in order to balance risk, and MPC Container Ships remains well-positioned to benefit from the expected market improvements,” Baack concluded.