Increases in freight rates buoy OOCL revenues

PUBLISHED : Saturday, 14 July, 2012, 12:00am
UPDATED : Saturday, 14 July, 2012, 12:00am


Orient Overseas Container Line saw revenues climb 5 per cent to almost US$2.88 billion in the first half of this year, buoyed by higher freight rates, especially in the second quarter.

The container shipping subsidiary of Orient Overseas (International), controlled by the Tung family, said total container volumes rose 6.1 per cent to 2.59 million teu (20-foot equivalent units) between January and June, up from 2.44 million teu.

Total revenue in the second quarter soared 10.6 per cent to US$1.56 billion teu against US$1.41 billion a year earlier.

This included a 15.2 per cent increase in revenue to US$326.89 million on Asia-Europe services even though container volumes slipped 0.4 per cent to 223,743 teu. Higher revenue in the second quarter reflected the five increases in container freight rates that OOCL levied on the trade. The company also imposed a peak season surcharge on shipments from Asia to Europe from June 1.

There was also a 14.4 per cent rise in revenue on intra-Asia and Australasia services to US$548.68 million in the second quarter although container volumes rose 8.2 per cent to 687,996 teu.

OOCL raised rates five times on the trade between April and June.

Intra-Asia and Australasia services remained the container line's top revenue earner.

By comparison, OOCL saw revenue on the transpacific climb 7 per cent to US$516.3 million in the second quarter, while container volumes rose 7.9 per cent to 325,729 teu.

But the transatlantic trade saw downward pressure. Revenue was up just 2.2 per cent to US$168.46 million in the second quarter, while volumes surged 9 per cent to 105,153 teu.

One transport analyst said the figures were solid. He added: 'The intra-Asia segment is outperforming, but transpacific volume is holding up as well.'

OOCL said average revenue per teu overall improved 3.7 per cent between April and June, although average revenue per teu dropped 1 per cent in the first six months.

Flagging potential problems in the second half, Jon Windham, marine transport analyst at Barclays Bank in Hong Kong, said while China's exports rose 11.3 per cent last month, they were down compared with May. This was the 'first June month-on-month decline in over a decade', he said, adding it was 'a warning sign of potential weakness' in the traditional pre-Christmas peak season for container lines.

This would be negative for container line stocks including OOIL and China Shipping Container Lines.

The prospects of a weak peak season, which typically runs from June to October, could see container lines hesitate about maintaining container freight rates at relatively high levels. Rates may fall as shipping lines undercut rivals to maintain volumes.