Xavier Destriau: Thank you, Sathish. The question on the contract rate, just to fact that into perspective yes, you’re absolutely right that it’s very much relevant for the transpacific region where we operate. And we normally contract 50% of our volume with a long-term contract and remain close to the spot market for the other 50%. So, clearly, what is happening with the steep decline in the spot market on some of the trades, the spot market went below the contract rate and you may remember that initially when we closed the contract season in April, we closed at elevated rates compared to the prior year. With that — so there’s a market in terms of rates went down and the cost at some point in the quarter, the average rate that we secure with our customers.
But more importantly, from our customer perspective, the demand was not there, and the volume was not there. So, we had to leave with this new reality and engage with our customers. Those customers are not customer for one year, for one season, they are recurring customers. We have a long-term relationship, and we intend to continue to have a long-term relationship. So clearly, the — as the spread between the contract rate in terms of dollar per TEU and the spot was increasing, we had to sit down and agree and revisit the pricing for those customers. In order to also protect to some extent, some of the — this is what has happened. We need to be pragmatic and make sure that we find the middle ground between the interest of our customers and ours.
To your second question with respect to the supply side and the flexibility that we have, we still believe that we said that 25 vessels are up for renewal next year. This is a significant amount that gives us some flexibility. And also when we look at which are the vessels that we are going to take delivery from next year out of the 46 that we intend to get between 2023 and 2024, we can get 18 of those in 2023. And nine of them will be the 15,000 TEUs, the large capacity vessel that we intend to deploy on the Asia-US east coast. The other nine will be 5,000 and three 7,000 TEUs. And the nine 15,000 TEUs that will be — we are eagerly waiting for those vessels, because they will be the most efficient one, they will repay capacity today at the cost, which from running the ship will be very similar, allowing us to increase the debt by 50%.
So if we manage to increase the intake, this will be an additional profit to the trade. And if we don’t, it would be a neutral what obviously may happen depending on what the market conditions are. We are also not alone in this play. As you know, we try to operate this vessel with our partners and there might be also some discussions around global network. I mean there are a lot of options for us to entertain and consider as we go along into 2023 and take those deliveries of those ships.
Sathish Sivakumar: Okay. Thank you. Thanks Xavier, and thanks Eli, and then Elana, thanks very much.
Operator: Our next question is from Sam Bland of JPMorgan. Please go ahead.
Sam Bland: Thank you. Thanks for taking the question. I two please. The first one is on have you seen — in terms of capacity across the market so far, I think Q2 2020 with blank sailings have you seen much of that yet? And if not, is that surprising? And the second question is, if we look at spot rates are, are there any lanes or regions where you say current spot rates are below the breakeven — thank you.
Eli Glickman: Sam, I hope I got your question right. You were a little bit breaking up. But from what I understand, the first question was around the land saving and whether we think that there will be more ahead of us than has been over the past few weeks. It is very likely. It’s very possible. The objective of the company as far as it goes remains the same. We intend to be profitable in the trade where we operate and we don’t wish to sell capacity at a lot. So the idea will be to make sure that we always operate our capacity and really grow capacity. We arranged the network of trade potentially or line where we operate in order to always be in a position where we avoid losing money on a given voyage. So if the rates continue to slide, the level of blanking will most probably continue to increase over the coming weeks.
And with regard to your second question, which was whether there are some trades where we think the spot rate has already across the breakeven point from a profitability perspective. I think in some trades, we are far from that and we already crossed the line. I was referring to earlier on to the trade between Asia to LA, which has been a trade that has been a very severely maybe one the most early on, severely impacted by the slide in the freight way. As you know, on those trades, we operate a specific service. We operate an expedited service, we still command a premium on the SCFI rates, but there is not much more room for further reduction in this trading. The Atlantic is still quite resilient. The US East Coast has been a bit more resilient as well.
Latin America was very resilient in the quarter is now sliding a little bit more. So, there is a difference in the pace of the normalization. But eventually, we think all the trades will find a new equilibrium at some point.
Sam Bland: Understood. Thank you very much
Operator: This concludes our Q&A session. And I hand back to Eli Glickman, President and CEO, for closing comments.
Eli Glickman: Thank you. ZIM continues to deliver outstanding execution and profitable growth reflected in our third quarter and nine months 2022 financial results. EBITDA and EBIT margins remain strong and our standing cash generation has enabled them to declare over $1.26 billion, or $10.55 per share in 2022 dividends. While the pace of market normalization has accelerated over the past several weeks, we remain on track to January 2022 adjusted EBITDA and EBIT that will represent full year report. I would like to conclude by highlighting that ZIM has been proactive over the last two years, taking a significant step to enhance and build resilience in our business to best position ZIM for the new enrollment. Commercially, we diversified our business and a multiple growth engines.
We have also secured a competitive, efficient and cost-effective new build capacity to support our commercial strategy for the benefit of customers and shareholders. Thank you very much for tuning in. We look forward to reporting on our continued progress. Have a good day.
Operator: Ladies and gentlemen, the conference has now concluded. And you may disconnect the telephone. Thank you for joining, and have a pleasant day. Good-bye.
