ZIM Integrated Shipping Services Ltd.

integrated shipping services, Q4 and full year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. I will now turn the conference over to Alana Holzman, Head of Investor Relations. Please go ahead.

Thank you, Operator, and welcome to ZIM's fourth quarter and full year 2023 Financial Results Conference Call. Joining me on the call today are Eli Glickman, ZIM's President and CEO, and Xavier Destrio, ZIM's CFO. Before we begin, I would like to remind you that during the course of this call, we will make forward-looking statements regarding expectations, predictions, projections, or future events or results. we believe that our expectations and assumptions are reasonable. We wish to caution you that such statements reflect only the company's current expectations and that actual events or results may differ, including materially. You are kindly referred to consider the risk factors and cautionary language described in the documents the company filed with the Securities and Exchange Commission, including our 2023 annual report filed today on Form 20F. we undertake no obligation to update these forward-looking statements. Before turning the call over to Eli, one housekeeping point. Since announcing the relevant charter agreements, we have referred to the 18 smaller LNG vessels as 7,000 TU vessels for their original design name and prior to their construction. The nominal capacity of these vessels is approximately 8,000 TUs. As such, going forward, We will refer to these vessels as 8,000 TEU vessels. At this time, I would like to turn the call over to Zim's CEO, Eli Glickman. Eli.

Thank you, Ilana, and welcome everyone to today's call. Reflecting on a challenging year, we at Zim have proven to be resilient and committed to excellence throughout our operation as we deliver the highest level of customer care even in the face of the industry disruptions and other operational challenges. The war situation in Israel is ongoing and continues to affect our employees here. We mourn the loss of all innocent lives and we continue to pray for the safe return of all Israelis who remains held hostage by Hamas in Gaza. Since the tragic events of October the 7th, our priority has been to ensure the safety and well-being of our employees and to minimize any service disruptions to our customers. I'm incredibly proud of the unwavering commitment that I have seen from our people throughout the organization during this challenging time and the collective spirit to continue to drive our business forward. Before discussing the current state of the market and Zim's strategic transformation, I will briefly address our financial results. Consistent with our latest expectations, our fully adjusted EBITDA was $1.05 billion and 23 adjusted EBIT loss was $422 million. These results were in line with the outlook we provided in November 23 and reflected the ongoing market weakness. Importantly, We ended the year with substantial liquidity of approximately $2.7 billion. Turning to slide four. Turning to the market environment, we've seen dramatic changes in recent months, demonstrating the volatility and dynamic nature of our industry. The escalating tensions in the Red Sea have had broad implications for container liners. In late November 23, to ensure the safety of our seafarers, our customers' cargo, and the vessels we operate, we made the decision to divert all ZIM vessels to pass through the Red Sea around the Cape of Good Hope until further notice. These Red Sea diversions, which others have also implemented, have been a destructive force across the industry, absorbing some of the overcapacity in the market and driving freight rates in certain trades higher. In January 24th, stricter draft restrictions imposed in the Panama Canal, including on container vessels, added to the supply squeeze we are currently experiencing. While this disruption had a minimal impact on our Q4 results, we expect first quarter and potentially second quarter earnings in 2024 to reflect the improved spot rates. Yet, As we look toward the remainder of the year, it is worth noting that there is a fundamental difference between the current disruptions and the prevailing market conditions during the COVID-19 pandemic. The COVID-era market was characterized by a significant increase in consumer demand accompanied by unprecedented supply chain disruptions. Current market conditions, on the other hand, are primarily supply-driven, and the significant spot rate increases remain somewhat limited to trades more directly impacted by the disruptions. Once the Red Sea crisis is resolved, we will likely revert to the supply-demand scenario that began to play out in 2023, setting up a more challenging third and fourth quarter of 2024 for the industry, including us. Given that market dynamics in the area will depend largely on the duration of the Red Sea disruption, we are taking a cautious approach in establishing our 24 guidance. As such, in 24, we expect to generate adjusted EBITDA of $850 million to $1.45 billion and adjusted EBITDA of negative $300 million to positive $300 million. Xavier, our CFO, will discuss the underlying assumption for our 24 guidance in his prepared comments. Going to slide number five. This strategic transformation is progressing as planned and is already yielding the favorable outcomes we projected. As we have communicated previously, 23 and 24 were always expected to be in transition period. We are pleased with the decisive steps we have taken to enhance ZIM's future commercial and operational resilience. As a result of these actions, we expect ZIM to emerge in a stronger position than ever in 25 and beyond. as our strategic transformation continues to deliver gradual benefits. Most importantly, we have executed a fuel renewal program that will enable ZIM to operate more efficiently and competitively. Through a series of long-term charter agreements, we secure a total of 46 new built container ships of which 28 are LNG powered. 24 vessels have already been delivered to us and another 22 are expected to be delivered through the remainder of 24. The advantages of this fleet are worth highlighting again. The goal was to shift ZIM reliance on all the less fuel efficient and less green capacity to a cost and fuel efficient, largely LNG powered new built fleet. Our core fleet will be modern, larger and better suited to the trades in which we operate. Our cost per TU is declining as we continue to take delivery of the cost effective new built tonnage and re-deliver expensive COVID era vessels. We expect further improvement moving forward. From an environmental perspective, we expect approximately one-third of our operating capacity will be LNG-powered in 2025, establishing ZIM as a clear industry leader in terms of carbon intensity reduction. We are pleased to offer our customers a pathway to more eco-friendly shipping options and reduce carbon emissions. Today, ZIM is the only carrier to operate LNG vessels from Asia to the US East Coast. We are deploying 15,000 TU and 8,000 TU LNG powered vessels on two different key services. We believe this further enhances our competitive position on this strategic trade for ZIM. As I already mentioned, during the remainder of the year, we have 22 outstanding new build deliveries that once completed will further enhance our fleet and complete our fleet renewal program. Our decision to charter these LNG vessels was part of our long-term strategic plan to enhance our market position, particularly in the Trans-Pacific trade, partly in anticipation of the termination of the two MN lines, which did, in fact, happen. We wanted to ensure that ZIM operates a competitive fleet that would allow us to operate independently if needed and at the same time would also make us an attractive potential partner to other liners. Our collaboration with the 2M will end at the end of January 25 as per the termination of the 2M alliance. Yet, we are confident that our new cost and fuel efficient new build capacity better position us to reach new operational collaborations in the future. And we continue to believe in mutually beneficial operational partnership, which we'll continue to seek when possible. We are focused on ensuring our fleet in the best aligned with demand levels. To this end, we are committed to rationalizing our capacity whenever necessary to minimize cash burning. In 23, we re-delivered 32 vessels and we have a total of 32 charter vessels up for renewal in 24. Turning to our network, we are constantly reviewing our services to best address customers' evolving needs and take advantage of new commercial opportunities with growth and profitability potential. Our decision to reinstate our ZTX service in late 2023, connecting South China to Los Angeles, was very timely, and we are now benefiting from volume growth reaching the U.S. West Coast. We proved our agility once again when we launched a second ZIM-operated West Coast Bound Service early in the first quarter of 24, in addition to our collaboration with MSC on this trade. This service connects Asia, Canada, and the U.S. via the Vancouver Gateway and includes expanded rail connection across North America. This service is also benefiting from recent market tailwinds. Latin America, where we see long-term growth and profitability potential, has been a focal point for us throughout 2023. We opened a number of different services and we are pleased with our growing volume in this region. We also made adjustments to services calling East Mediterranean ports to address changes resulting from the Red Sea crisis and capture market share. we redeployed existing capacity to this service and did not charter additional capacity to maintain a weekly service on our Asia to East Med service. Delivering our signature Z-Factor customer care, which combines personal touch with advanced digital tools, remains a high focus. This year, especially against the personal challenges, We are especially pleased to receive better than ever result from our 23 annual customer experience service. We see positive trends in the important parameters such as satisfaction within customer loyalty and our customers view our service versus our competitors. Moving to slide number six. Our capital allocation strategy for 2024 remains unchanged and equally cautious. We intend to invest our resources to enhance our long-term value for the benefit of shareholders, namely our fleet, our equipment, as well as our gross engine, while at the same time, we continue to pursue cost-saving and cost-avoidance initiatives to preserve cash. So preserving cash remains a top priority. We believe there continues to be a value in investing in growth engines, namely selectively investing in early-stage companies developing disruptive technologies in our core shipping activities and broader logistic ecosystem and assisting these companies to reach their potential needs their potential as active strategic investors. An excellent example in our recent announcement to install cutting-edge tracking device on our dry van containers developed by Hooper System, one of our portfolio companies. We are excited to see our investment in Hooper's unique technological solution mature into what we believe is the most advanced tracking device for dry containers. At Zim, the use of technology and digital tools combined with our agility are core strengths which promote our operational and commercial resilience and efficiency. The upcoming months still represent a transition period for our company. but we are excited about what the future holds. During this time, while market conditions remain uncertain, our strong cash position will enable us to maintain a long-term view. Our entire organization is focused on returning ZIM to long-term sustainable profitability. On this note, I will turn the call over to our CFO, to Xavier, for more detailed discussion of our financial results, our 24 guidance, as well as additional comments on the market environment. Please.

Thank you, Eli. And again, welcome, everyone. On this slide, we present our key financial and operational highlights. Echoing Ellie's earlier comments, 2023 marked a challenging year, but ZIM remains resilient. Due to the weak market, ZIM generated revenue of $5.2 billion in 2023, a 59% decrease compared to last year. During the year, our average freight rate per TEU was $1,203, 63% lower than in 2022. as we were again adversely impacted by the continued decline in freight rates. In Q4, our average freight rate per TEU was $1,102, that is a 48% decline year-over-year and a 3% decline from the prior quarter. Total revenue from a non-containerized cargo, which reflects mostly our car carrier services, totaled $534 million for the full year of 2023. And that is 73% increase compared to prior year. This growth resulted from our expanded capacity in 2023, as well as underlying positive market dynamics. As also Elie previously indicated, the Red Sea disruptions had minimal impact on our Q4 results. Our free cash flow in the fourth quarter totaled $128 million compared to $1.05 billion in the fourth quarter of 2022. Turning to the balance sheet, total debt increased by $666 million since prior year end, mainly due to the net effect of the incoming larger vessels with longer-term charter durations. Regarding our fleet, we currently operate 150 vessels, out of which 16 are car carriers. This increase from November resulted from the delivery of 12 vessels and the scheduled re-delivery of seven ships. Excluding the new build capacity, the average remaining duration of our current charted tonnage continues to trend down and is now 20.4 months compared to 22.7 months in mid-November. As of today's call, 24 of the 46 new-build vessels ZIM committed to have joined the fleet. Since our last update in November, we received three 15,000 TEU LNG vessels, five 8,000 TEU LNG vessels, two wide-beam 5.5,000 TEU vessels, and one wide-beam 5.3,000 TEU vessels. February 2024, we also completed the purchase of five vessels for a consideration of $129 million, following an early notice for the exercise of purchase options we held from the 2014 restructuring. These vessels range in size from 8,400 TEU to 10,000 TEU. The decision to acquire these vessels does not mark a change in our vessels sourcing strategy, but rather it is us taking advantage of beneficial terms to acquire the ships. We have a total of 30 vessels up for charter renewal in the remainder of 2024, as compared to the expected delivery of 22 new builds during this period. In addition, we have another 37 vessels up for renewal in 2025. This gives us ample flexibility to ensure our fleet size matches the market opportunities. Again, I would like to highlight that while we may continue to operate a similar number of vessels or even fewer vessels, our operated capacity has grown and will continue to grow in 2024. The new build are replacing smaller vessels, less cost-effective tonnage with larger, more cost-efficient tonnage, thereby contributing to lowered unit cost per vessel. These vessels are also better suited to the trades in which they are being deployed, again, improving our competitiveness. Turning to our fourth quarter and full-year financial performance, Q4 revenue was $1.2 billion compared to $2.2 billion in the fourth quarter of last year. Adjusted EBITDA in the fourth quarter was $190 million compared to $973 million in Q4 2022. And for the full year, net loss was $2.69 billion compared to a net income of $4.63 billion in 2022. To remind you, our full year 2023 net loss includes a $2.1 billion impairment loss recorded in the third quarter. Adjusted EBITDA in 2023 was $1.05 billion compared to $7.54 billion in 2022. You can see that adjusted EBITDA and EBIT margins were significantly lower this year versus last year. Turning to slide 10, we carried 786,000 TEUs in the fourth quarter compared to 823,000 TEUs during the same period last year. That is a decrease of 5% compared to a market growth of 7%. For the full year, we carried 3.3 million TEUs, a 3% decline compared to 2022, and the overall market, which was more or less flat. Importantly, our Trans-Pacific volume grew 9% in 2023, and we expect to see growth in 2024 as we upsize our capacity. Growth in Latin America was driven by our expanded presence in this trade. And conversely, intra-Asia volume is down as we cut our capacity in this region, including services to Australia and New Zealand, and also Africa, due to weaker demand. Next, we present our cash flow bridge. For the full year, our adjusted EBITDA of $1.05 billion converted into $1.02 billion of cash flow generated from operating activities. Other cash flow items for 2023 included dividend payments of $769 million made in April 2023 and $2.09 billion of debt service, mostly related to our lease liability repayments. Moving now to our 2024 guidance, we expect to generate adjusted EBITDA between $850 million and $1.45 billion in 2024, and adjusted EBIT between negative $300 million and a positive $300 million. Overall, we assume average freight rates to be slightly higher than in 2024 as compared to 2023. We also expect first quarter and potentially second quarter to benefit from current higher spot rates in certain trades, while the second half is expected to be weaker than the first half of the year. We also expect our volume to grow in 2024 versus 2023 as we receive our new build capacity and are able to better optimize our fleet coupled with potentially better demand than in 2023. As for our bunker cost, we expect a lower cost per ton in 2024 versus last year, 2023, as we shift towards more LNG consumption. As Eli had mentioned, the crisis that has evolved in the Red Sea over the past three months, which caused most global carriers to divert their vessels away from the Space Canal and around the Cape, demonstrated the fast pace at which market conditions can change in our industry. If in November 2023 we anticipated rates to remain flat through 2024 amid a supply-demand imbalance, today the SCFI is over 80% higher as the longer voyages around the Cape are estimated to have absorbed 6% to 7% of global capacity, creating a more balanced supply-demand equilibrium. Yet the long-term impact of the Red Sea crisis remains unknown. First, it remains unclear under what circumstances trade through Suez would resume. And although there doesn't appear to be a military or political resolution of the crisis in sight, that could change as quickly as the crisis itself has evolved, causing rates to drop quickly back to November, December 2023 levels. Moreover, even if the crisis persists, the long-term impact on rates also remains to be seen. Rates in January seem to have peaked in conjunction with a seasonal cargo rush prior to Chinese New Year and have since abated. In other words, strong demand could potentially keep the rates higher, but if demand is weak, as shippers remain cautious on inventory levels throughout 2024, rates could continue to slide down. The underlying supply-demand balance in 2024 points to clear oversupply, with over 3 million TEUs, or approximately 10% of current global capacity, expected to be delivered during the year. The Red Sea crisis has created a more balanced market. However, it should be noted that of the expected deliveries of 2024, 1.9 million TEUs or 120 container ships are 10,000 TEU or larger in terms of size. These are large capacity vessels that could be deployed on east-west straits that have been impacted by the Red Sea crisis. As such, new-build deliveries could alleviate the supply pressure that currently exists on some vessel segments. The change in market conditions also impacted capacity management actions taken by carriers. The simultaneous restrictive passage through both the Suez and Panama Canal though for different reasons, has sidelined slow steaming which was used in 2023 to absorb some capacity, as well as idling and blanking which were used more modestly. Expectations for scrapping in 2024 also remain limited at only approximately 357,000 TEUs, less than 2% of current global capacity, compared to the 10% scheduled deliveries. Although current market conditions may have put a hold on the various capacity management actions available to carriers, longer term, we believe IMO 2023 and the decarbonization agenda may motivate liners and vessel owners to retire older vessels earlier than in the past, resulting in a step up in scrapping and helping the market to offset some of the new build capacity. Short term, however, the current market condition, we believe, create significant uncertainty for carriers in 2024 and warrant a cautious view of potential outcomes this year. And on this note, we will open the call for questions.

Thank you. If you have a question, please press star 1 on your telephone keypad. If you have queued up and want to withdraw your question, simply press star 1 again. Your first question comes from the line of Omar Naqta with Jefferies. Your line is open. Thank you.

Hi. Good afternoon, Ailey and Xavier. Just a couple questions for me. All right. Obviously, first, I think on the guidance for 2024, you know, you guys both discussed kind of the backdrop of that, but just kind of getting thinking into that just a bit deeper. It looks like the lion's share of the guidance range could be achieved in the first half of the year. So just in general, wanted to see what sort of baked in a bit for, say, the second half. You mentioned being conservative in the second half of the year. Are you assuming basically a solid first half based off of what's going on in the market and then in the second half you assume EBITDA, do they fall to where they were in the second half of last year? Or do they go much worse? Or are you assuming a moderation? Any color you can give basically on the second half would be helpful.

Yes, clearly today we live in uncertain times, but we have seen already towards the end of last year and continuing into the beginning of this year, 2024, that the spot market has been going up quite significantly on the trade that are very relevant to us. Obviously, the crossways for one, but also the Trans-Pacific as a ripple effect of the redeployment of some capacity. So spot market went up. quite significantly. Let's not forget that we also are bound by some volumes that are contracted that were less benefiting from the surge in the spot market. Now, this is a fact for the first quarter at least of 2024. We anticipate that we will continue to be in a rate environment that is a better one compared to the one of last year towards the second quarter. And then I think what we are suggesting in our guidance is that there is a scenario according to which the minute the situation in the Red Sea gets solved, then most likely, obviously, liners will go back to crossing via Suez. And as a result, we will go back into the market dynamics fundamentals that prevailed before the Red Sea crisis started to erupt towards November of last year and with the significant threat of oversupply. And as we've seen already in the past, after the very good years of 21 and 22, when the situation started to get better, the rates collapsed quite significantly and quite sharply and quite quickly. So we think there is a scenario according to which the rates might go back clearly to where they were towards October, November timeframe of 2023 towards the second half of 2024.

Okay, thank you for that color. And then I guess just, you know, you've mentioned a few times that the first quarter is looking, it's going to be solid 2Q, potentially also healthy. Do you think that there is potential for actual, you know, a shift into positive earnings territory, at least in one queue? And then any color then in what that means for the dividend policy? I know there's no mention of that, I think, in the release, but is there, is the intention still if we have a profitable quarter to pay out, you know, 30% of earnings?

You start by saying that we guide that Q1, Q2 will be healthy. I don't know what you mean by healthy. What we suggest is better than what we generated in the first quarter of 2023. And as we did say, the second half is going to be more challenging. So clearly, in terms of a calendarization of the guidance that we provide, a shift towards the early part of the year is to be expected compared to the second part of the year. Now, when it comes to the dividend, and maybe a little bit early to talk about dividend at this stage, but our policy stands. And so the distribution dividend policy remains unchanged. And of course, the board will continue to review every quarter the capital allocation strategy and decide on the possible distribution to shareholders.

Understood. Thank you. And one final one for me, just on the, you know, we're coming up here on contracting season in the Trans-Pacific. I'm guessing it's probably a little early for you to give us a sense, you know, but I wanted to ask you about that and just in general, you know, one of the things that we saw last year perhaps was, you know, shippers being able to get out of contracts and leaving you and many operators in the spot market more so than anticipated. Any kind of color on how things are developing? And then is there any situation in which if you were to enter into contracts this year, But there would be more of a take or pay variety or would they still, you think, revert to the traditional way of contracting?

Look, the discussions with our customers have started and really, you know, the kickoff during the TPM conference on the West Coast that took place last week. So what we clearly can say at this stage is that we have seen a lot of traction here. A lot of interest from our existing customer base, but not only, by the way, also new customers that are coming to see us. And they are very interested by our LNG proposition at the end of the day, just to re-emphasize that we are the only shipping line Today, deploying two services that are mostly LNG powered on the US East Coast. So that triggered clearly a strong interest and a lot of questions around this strategy of ours was being discussed with our customers and the new customers potentially. A little bit early, as you said, to say or to assume as to where we will land when it comes to the contract volume and also the prevailing rates that we will manage to secure with our customer base. You know, some are waiting a little bit as well as they potentially want to get more visibility as to what the spot markets might be doing in the coming weeks. They still have a lot of weeks to go before we aim at concluding the discussions. So the pace of our customers might vary from customer to customer. We clearly have ourselves some internal objectives that we are willing to achieve in this respect. But a bit early to say where we will close this contract season.

Okay, thank you. Thanks, Xavier. Thanks, Eli. I'll turn it over.

Your next question comes from the line of Alexia Degani with Barclays. Your line is open.

Yes, thank you, gentlemen, for taking my questions. I also had three. Just firstly, on the volume outlook you've given, can you help us a little bit understand the magnitude of volume growth Your peers have talked about global trade recovering to 3% to 4%. Should we expect you significantly higher from this level because of your upsizing, or how should we think about that? Secondly, on the spot rate discussion, I mean, we've seen the spot rates rise kind of peak already, if you like, as carriers are now adjusting their schedules around the Cape of Good Hope. And can you help us understand at the upper end of your guidance, what is really the trajectory you expect from here? Is it that they stay flat from the current levels? or what is kind of the evolution. And then, finally, I want to understand a little bit your comments around cash preservation in the current market. Clearly, financial leverage increased significantly at the end of the year. It's now 2.2 times net debt to EBITDA. If I look at your guidance, which is broadly flat, let's say, year over year at the midpoint, How should net debt evolve? And maybe you can give us a little bit of color around CapEx. I see you've bought some vessels. Have you done any more charters in this period to get capacity for the sailings around the Good Hope? Anything you can help us with that, that would be great. Thank you.

Thank you, Alexia. So I'll start with the first question around our volume assumptions for 2024. Yes, we are also looking at the market growth expected to be around the numbers you quoted, the 3%, give or take, in terms of the potential growth in demand. As far as we are concerned, we have more ambitious objectives in terms of growing our volume of carried TEUs as a result of us upsizing the vessels that we are deploying in many of the trades where we operate. Trans-Pacific trade is clearly one where we have... significant growth volume assumptions here. We've reopened the line that we suspended in 2023, our fast line between South Asia to the U.S. southwest coast. We've opened a new line On the Pacific Northwest, we are upsizing the vessels that are currently being deployed on our trace between Asia to the U.S. East Coast. So we intend to fill those ships. And as a result, we have gross volume assumptions on those trade lanes. Second, also on the backhaul, back from the US to Asia, we also, as opposed to repositioning empty containers, we are putting a lot of commercial efforts in order to capture some of the full cargo that can be moved back from the US to Asia. And that also will count in our volume growth assumptions as opposed to moving back and empty. And third, in terms of region, we also... growing quite rapidly and in latin america we have a redeployed capacity away from introasia also to the latin america trade lane we see growth opportunity in the future and i think we're talking midterm long term here as well especially between the north of north america and south america as we see the the the patterns of our customers willing to diversify also their their sourcing base away from the predominance of China. I'm sure you've seen Mexico taking a very strong position in terms of import in the U.S. this year, outperforming China. So we want also to make sure that we position ourselves early on those trade lanes where we believe that there is a significant growth potential. Spot rate, your second question in terms of what is our forecast in terms of evolution. I think, you know, we talked about two potential scenarios. We think that, yes, they may have a peak that they will potentially trend down. And then now the pace as to which they will trend down and potentially go back to where they were yesterday. before the Red Sea crisis started to erupt, will be in itself a function of when the disruptions in the Red Sea dissipate. And if they dissipate during 2024, we think the rate adjustment might be quite severe and quite rapid. If the Red Sea situation continues, we expect that then the new capacity coming into the trades will put additional pressure on today's market, where already some of the capacity has been reduced. by the redirection of tonnage around the Cape of Good Hope, but all incoming vessels coming into the trades between now and the end of the year, even if the Red Sea situation was to last for longer, will put pressure on the supply-demand equilibrium. Then I think you had a question on cash preservation and what is our objective or what is the capital structure or what is the trend of the capital structure of the company going forward. You are correct that we are closing 2023 with a leverage of 2.2. Clearly, and we've mentioned that, I think... since uh since quite a few quarters now as a result of the 46 new build the program that we initiated back in 2021 and 2022 we will see our debt uh continue to increase and so the the balance sheet the lease liability that we have on balance sheet will continue to go up up until we get delivery of the last vessel. So towards the end of 2024, we should see an increase in our lease liability on balance sheet before it starts to trend back downwards in the years thereafter. Our objective today is indeed to return the vessels that are up for re-delivery and we have 30 vessels up for re-delivery between now and the end of the year to make room for the 22 new build tonnage that we are expecting to receive also between now and the rest of the year. So I think back to your last question in terms of charter assumptions, we don't intend to re-charter vessels between now and the end of the year. Rather, we will re-deliver vessels that are coming up for renewal in order to make room for our new build and cost efficient vessels.

Thank you. And can I just check a little bit of a follow up on the volume growth assumptions? I mean, should we be thinking high single digits or do you think you might go to double digits because of your comments on new services on those routes? Thank you.

Look, we are, like I said, quite ambitious here. We will grow our operated tonnage double digit. Hence, we will aim at growing our carried quantities also double digit.

Thank you. Your next question comes from the line of Satish Sivakumar with Citi. Your line is open.

Yeah, thanks, Xavier. I've got three questions here. Maybe let's start off with car carriers, right? What's happening there in terms of demand, given there's a lot of new slowdowns, slowdown of, like, auto vehicles and such? If you could share some color on that, that'll be helpful. And then just going back to the contract season negotiation, obviously, it is still too early to comment on where I end up, but trying to compare this year versus last year uh what is the like say where you are today versus last year are you sign more volumes or you sign less volumes uh any color like say year on year is it how does it trending uh that will be really helpful and and then uh the third one is more around the Just your point on the operated 10-inch that you're likely to grow on double digits. So what does it mean? Would it come more based on contracted volumes, or would you go into the spot market and you're likely to prioritize volume or market share to make sure that you utilize the incoming capacity? And then can I add one more, actually? In terms of East Coast versus West Coast, there has been growing commentary that shippers are likely to switch some volumes into the West Coast because of the labor negotiations coming up in the East Coast. And you are actually a bigger player in the East Coast, given that you're going to almost double-digit capacity. What does it mean in terms of volumes?

Okay, thank you, Satish, for your question. Thank you. So, starting with your first question on the car carriers. So, we operate today as 16 ships, and we did indeed grow our operated tonnage in this activity over the past few years. We always say that we saw an opportunity, a window of opportunity, and we appreciated entered that window of opportunity quite aggressively over the past few years, as we saw an imbalance in a way, opposite to what's happening today on the container liner. But we saw an imbalance between the surge in demand of moving cars from Asia mostly to the Western countries and limited available tonnage. So we today see and expect to see, as we have seen in 2023, a continuation of those favourable dynamics in 2024. before more vessels are being indeed delivered. And we know that a significant number of new tonnage will come into the trades in 2025 and beyond. And this is why we will continue to monitor quarter after quarter, year after year, what is happening in this sector and potentially limit our involvement if the market conditions were to change. But when it comes to 2024, for the coming year, we are quite optimistic that it should be a good place to be in, just like it was in 2023. Going to your second question, the contract season, yes, I mean, today is still very early days for us to opine as to where we will conclude in terms of committed capacity and rates. We used to try to seek 50-50% in a way, 50% exposure on spot and 50% of our intended volume secured via a contractual commitment. We don't know, not at any price. So we will clearly need to make the arbitrage between the expectations of some of our customers and what are our own expectations. We need to find the right balance between the various parties here. So we'll see. And again, hopefully we'll be able to give a little bit more color into that once we have finalized the discussions. And we talk again during our Q1 earnings call. But objective of the company remains to secure a significant percentage, around 50% of contract cargo. And like I said, very promising discussions already started with our customer base during the TPM conference a week ago. Um, I think, uh, the, uh, the, uh, what was the third question now? I can't remember the third question. So I'll go into the fourth.

Sorry. We'll come back on the third one. Now the third one is around the OPEC and age, uh, you're likely to grow double digit. What does it mean? Uh, like on contracted volumes, do you prioritize going to market? Are you more about volume than pricing?

Yes, I think it's very linked to the second one at the end of the day. We do not today aim at going aggressively more than 50%, which has been pretty much the norm in the past for the company. We don't have here an objective to go and lock and secure a significantly higher percentage of contract cargo. We truly believe that at Transpacific, we have a compelling proposition in terms of the lines that we operate, the services that we operate, the deployment, again, of the unique deployment of LNG tonnage on the surface. main trade between Asia to the US East Coast that, again, are attracting a lot of attention from our customer base because, of course, they see that as a way for them to reduce their own carbon footprint. So we are hopeful and quite optimistic in a way that we will manage to deliver on our volume assumptions for next year without having to change the philosophy in terms of spot versus contract exposure. And then I think your last question was, what about the potential shift of cargo between the East Coast and the West Coast now that the discussions with the unions are taking place for the terminals on the East Coast? We don't know. I mean, clearly, the discussions are ongoing as we speak. And we know that there are some timelines and deadlines that some of them are approaching soon. We today do not feel that there is a panic from our customer base to move cargo away from the East Coast to the West Coast. Time will tell what happens and what is the outcome of the discussions. But as we speak, as of today, we don't see or we don't feel any significant movement or actions taken by our customers to shift cargo from east to west. Maybe I would add that we are now also increasingly present on the west coast with now three services that we operate between Asia to the US west coast. Two that we operate, one where we jointly operate with a partner. But that is also us increasing our footprint on the trade between Asia to the US, LA, and also Pacific Northwest.

Thank you, Xavier. That's quite helpful.

Your next question comes from the line of Oystein Wagen with Fernley Securities. Your line is open. Oisteen, perhaps your line is on mute.

Can you hear me now?

Yes.

Hey, guys. Just a quick one from me, which kind of relates to the previous question. I see other revenues, or call it non-containerized revenues, are up quarter on quarter. Would you be able to give some kind of a split or color on how much cart carriers that is and how much demurrage and other And if possible, how we should think about this going forward.

Yes, I think I can be quite precise as to the number, the revenue that we generated out of our car carrier activity, which is slightly in excess of $500 million for the full year of 2023. And if we were to consider what will be the outlook for 2024, we're going to be in a similar ballpark, continue to operate the same capacity, which is 16 ships.

Perfect. Thank you.

This concludes our Q&A session. I'll turn the call to Elias Buchmann for closing remarks.

Thank you. You're in a challenging view. Our employees across the globe maintain a steadfast focus on achieving the highest operational standards and delivering an exceptional level of customer care demonstrated by the better than ever results from our 23 annual customer experience service. We'd like to personally thank the entire ZIM team for their commitment and dedication, especially in light of the industry and operational challenges as well as the ongoing growth. In 2023, we advance ZIM's strategic transformation as planned and are pleased with the progress we've already made to enhance ZIM's future commercial and operational industry position. Based on our strong liquidity, we will maintain our long-term view and intend to continue to take decisive steps to further benefit from our strategic transformation and emerge in a stronger position than ever in 25 and beyond. Thank you again for joining us today. Have a great day.

Thank you. This concludes today's conference call. We thank you for joining. You may now disconnect your line. Thank you. This concludes today's conference call. We thank you for joining.