OOIL sales fall 42.3pc on slow demand pick-up
Orient Overseas (International) Ltd (OOIL) yesterday posted a 42.3 per cent decline in third-quarter sales as weaker than expected demand thwarted attempts by container shipping lines to raise rates.
'The back-to-school demand was not as strong as expected,' said Jim Lam, a transport analyst for BOCI Securities, referring to the end of the summer holidays, in a teleconference yesterday. The post-holiday cargo demand should have started in July and August but did not come until last month, he said.
Shipping companies were now hoping strong Christmas sales in the West would push retailers to start restocking, he said.
The continuing slump in the global shipping business has been nowhere worse felt than on the west coast of the United States, where dockers in Los Angeles and Long Beach are lining up for work because of a lack of arriving containers.
This contrasts with early last year, when port congestion left vessels waiting in line offshore.
Last month's imports fell 16 per cent at Los Angeles and 19 per cent at Long Beach from a year earlier.
Meanwhile, OOIL painted a less negative outlook for next year yesterday, saying growth in the global capacity of container ships would fall to 8 per cent from 13 per cent this year.
This will come about as shipping lines continue to reduce capacity by returning chartered ships to the owners, leaving other vessels idle or postponing the delivery of new ships.
OOIL has returned 29 chartered vessels this year while French shipping line CMA CGM announced recently a delay in taking delivery of 49 vessels over the next three years.
'The shipping lines are more disciplined than ever in managing their capacity input,' Lam said.
Shipping lines were also more conscious about the bottom line instead of just trying to fill the ships with cargo, he said.
Exporters and shippers still have the upper hand in freight rate negotiations with shipping lines.
The average income per 20-foot equivalent unit (teu) was US$892 in the third quarter for OOIL, up from US$852 in the second quarter. However, the US$40 increase was less than the shipping lines had expected.
The Transpacific Stabilisation Agreement had proposed shipping line members increase freight rates US$500 per 40-foot equivalent unit from August 10. Shipping lines also said they would raise the rate for each teu at least US$100 for the Asia-Europe trade lane from September.
OOIL booked US$948.8 million in sales in the third quarter, down from US$1.64 billion a year ago.
OOIL shares closed 0.98 per cent lower at HK$40.60 yesterday.