US, Europe demand helps lift OOIL sales

The recent decline in sales and volume at Orient Overseas International (OOIL), the shipping line controlled by the family of former chief executive Tung Chee-wah, substantially narrowed in the fourth quarter owing to an increase in demand for cargo from the United States and Europe.

The Hong Kong-based shipping company said the drop in volume slowed to 4.1 per cent year on year in the last quarter, compared with a 16.7 per cent decline in the third quarter and an 18.7 per cent dip in the second quarter.

The number of containers handled amounted to 1.1 million 20-foot equivalent units (teus) in the last quarter. The volume on the transpacific route fell 0.7 per cent year on year, while the Asia-Europe trade lane was down 6.9 per cent.

Total sales fell 22.7 per cent to US$1.07 billion in the fourth quarter from a year earlier, compared with a 42 per cent drop in the third and second quarter. Freight rates have stabilised after several attempts to restore prices by shipping lines since June.

Overall average revenue per teu decreased 19.4 per cent year on year. The drop narrowed from about a 30 per cent decline in the previous two quarters. However, the average freight rate per teu fell 30 per cent year on year on the transpacific route, highlighting the problem of over-capacity on the route.

Shipping lines tried to reduce capacity through slow steaming and slot sharing between shipping lines and shipping alliances. But over-capacity still clouds the industry, given the massive delivery of new vessels this year. OOIL will take delivery of nine vessels this year.

In the fourth quarter, OOIL cut loadable capacity by 16.8 per cent year on year, compared with an 11.5 per cent reduction in the third quarter and 8 per cent in the second.

The aggressive cut in capacity resulted in an improvement in the load factor, the percentage of cargo space packed. The load factor was 10.7 per cent better than the same period in 2008, the first advance in load factor last year.

Shares in OOIL rose 4.48 per cent to HK$57.15 yesterday.