Taiwan's Yang Ming has benefited from the improving container volumes on the Asia-US trade.

Clarification: A European shipper was originally quoted saying that the South Korean government had a stake in now-defunct Hanjin Shipping. This was not the case. The South Korean government aided Hanjin with financing, but didn't have a formal stake in the carrier, like the Taiwanese government has in Yang Ming.

Yang Ming Line has outperformed the market in terms of US container imports during the first quarter, and the Taiwan carrier will be hoping that this placates customers startled when it announced a two-week suspension of trading in its shares.

Yang Ming on April 20 halted trading on the Taiwan Stock Exchange in an effort to reduce the carrier’s equity capital by more than 50 percent. The company will resume trading on May 4.

But a rising tide lifts all boats and the first quarter of 2017 has seen improving container volumes on the major east-west routes, and especially Asia-US. For instance, March throughput was the strongest in the Port of Charleston’s history, with 192,411 TEUs handled during the month.

Yang Ming’s share of US imports in the first three months of 2017 rose by 8.77 percent to 214,597 TEUs compared with a 7.25 percent increase in the first quarter recorded by the rest of the market, according to PIERS, a sister division of JOC.com.

The share of US exports carried by Yang Ming was not as impressive, falling by 4.7 percent to 36,942 TEUs in the first quarter while the volume carried by the other carriers combined increased by 1.93 percent.

Of the almost 215,000 TEUs imported into the United States on Yang Ming vessels in the first three months of 2017 by non-vessel operating common carriers (NVOCCs) and beneficial cargo owners (BCOs), NVOs had a far greater share than BCOs, PIERS data show.

NVOs handled 119,339 TEUs in the first quarter, while BCOs carried 95,257 TEUs. But looking at the March versus February percentages for US containerized imports on Yang Ming ships, NVOs showed a 12.6 percent drop in March compared to the previous month, while BCO cargo imported into the United States was up 6.13 percent in March.

But the supply chain director of a major Europe retailer was unmoved by Yang Ming’s volume performance in the first quarter and was deeply concerned about the suspension in trading of the company’s shares.

“Hanjin is still too fresh in my mind to take a chance so when I heard of the suspension of trading I instructed all our agents not to book on Yang Ming. We could ignore the whole of THE Alliance, but then there are only two other alliances to choose from. It is a very worrying situation for us.”

Yang Ming earlier this week emphasized that its trading halt was a standard part of the recapitalization process the carrier has embarked on. "The suspension is simply a standard procedure that is routinely carried out in the Taiwan Stock Exchange when a company implements a recapitalization as in the case of Yang Ming," the comapany said.

Yang Ming was last profitable in 2013, when the carrier posted a profit of $92.2 million. As of last fall, the carrier had the most leveraged balance sheet of all the major carriers, with net gearing totaling 437 percent, according to Drewry Financial Research Services. That’s well above the industry average of 124 percent and nearly five times that of fellow Taiwanese carrier Evergreen Line.

In its recapitalization plan, six investors have ponied up $54.4 million total in exchange of 161.33 million shares. Taiwan’s National Development Fund of the Taiwan is taking a 6.39 percent stake in Yang Ming, giving the Taiwanese government a 36.5 percent stake in the carrier once the first round of recapitalization is complete.

In an April 3 advisory, Yang Ming reassured customers that it hadn’t needed to ask vendors to modify terminal terms, much less default on its obligations to vendors. In the notice, the carrier pointed to how its fourth quarter loss of $64 million was $89 million less than its third quarter loss, giving the carrier “a hopeful indicator of a reversal in the market.”

In November, Yang Ming Chairman Bronson Hsieh dismissed rumors that his carrier and Evergreen Line would consider merging as a wave of consolidation sweeps through the industry.

Spot rates on the eastbound Pacific peaked before the commencement of the Chinese New Year celebrations in Asia on Jan. 28. The spot rate to the East Coast in late January peaked at $3,647 per FEU, and the West Coast rate peaked at $2,211. The weekly rate movements are tracked at JOC.com’s Market Data Hub.

However, since the new alliances were launched, the trade has begun settling into the normal spring pattern of single-digit rate erosion each week. Spot rates historically turn around in the summer when the back-to-school merchandise enters the United States.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.

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