OOCL bemoans drop in freight rates
Orient Overseas Container Line, the Tung-family controlled container shipping company, has faced 'difficult' trading conditions in the first half of this year as falling freight rates coupled with higher fuel costs offset the increase in cargo volumes.
The company said: 'The outlook for the full year is disappointing.'
The carrier said revenue climbed 8.5 per cent to US$2.74 billion in the first half of this year, up from US$2.53 billion a year earlier.
But cargo volumes grew at a faster pace with a 9.4 per cent rise in container liftings to 2.44 million 20-foot equivalent units (teu) between January and June, up from 2.23 million teu last year. As a result, in the second quarter average revenue per teu dropped by 4.8 per cent compared with the same period last year.
The carrier was hit particularly hard on Asia-Europe and transpacific services. On the European trades OOCL saw revenues crash 7 per cent to US$561.59 million in the first half, down from US$603.56 million between January-June 2010.
There was also a 13 per cent drop in revenue to US$283.75 million in the second quarter, against US$326.16 million in the second quarter last year.
This was despite a 13.3 per cent rise in container volumes to 420,746 teu in the first half of this year.
On the transpacific, OOCL's biggest market in terms of revenue, the carrier saw a 6.9 per cent increase in revenue to US$956 million in the first half, up from US$893.93 million. This followed a 2.5 per cent rise in container volumes to 598,266 teu.
There were brighter results on intra-Asian and Australasia services with a 19.1 per cent surge in revenue to US$901.7 million, against US$757.1 million a year earlier. By comparison, container liftings rose 12.1 per cent to 1.23 million teu, up from 1.1 million teu to make the trade OOCL's largest market in terms of cargo volumes.
The delivery of new ships, including the 8,888 teu OOCL Beijing in April, led capacity to climb 18.3 per cent. But the rise in container volumes failed to match this growth in capacity after the overall load factor on OOCL's fleet of container ships dropped 8.3 per cent.
'The difficult trading conditions seen in the first quarter of this year have continued in the second quarter, and the outlook for the full year is disappointing,' the company said. 'Demand levels remain reasonable as reflected in an overall year-on-year increase in liftings.'
The carrier added that freight rates deteriorated further during the second quarter, 'particularly on the Asia-Europe trades. The deterioration in freight rates has occurred despite the need for improved revenues to offset the significant increases in the price of bunker [fuel] and other energy-related costs that have occurred this year.'
Nobody from the company was prepared to comment on the results or market outlook because parent company, Orient Overseas (International) was in the pre-interim results blackout period.
But Barclays Capital said freight rates on Asia-Europe and transpacific trades had continued to fall.
Jon Windham, director of Asia marine transportation research for Barclays Capital, said the spot container freight rate from Shanghai to the US west coast was down 7 per cent in mid-June compared with a month earlier, while westbound freight rates to Europe fell 5 per cent in the same period.
This reflected the increase in container ship tonnage on both Asia- Europe and transpacific trades.
The uncertain outlook for the rest of this year has led OOCL to delay the implementation of a peak season surcharge until August 1.
Shares in parent OOIL dropped 1.5 per cent to close at HK$45.85.