OOCL parent chief points to gradual market recovery
Growth in capacity remains a concern on key trade lanes, but supply-demand fundamentals are improving for container lines, according to a leading executive at OOCL’s parent company.
Speaking as he announced a return to profit last year for the Hong Kong-based shippng line, CC Tung, chairman of Orient Overseas (International) Limited (OOIL), said supply-side growth was ongoing across global container trade lanes.
“Even if the ordering of new vessels remains muted in relative terms, upsizing of capacity continues in certain key routes,” he said.“Ultra-large vessels ordered in the past few years are now being delivered and brought into operation. Furthermore, as trade growth improves, the industry continues to introduce additional services using cascaded or previously idled capacity.
“This combination of better economic growth and continuing - if moderated - growth in supply, along with higher bunker prices, means that for OOIL and our peers, the environment remains merely one of gradual recovery, not the boom that some analysts expected when improved economic data first started to appear.”
Last year, OOCL placed no newbuilding orders but did take delivery of five ‘Giga’ Class 21,413 TEU vessels ordered from Samsung Heavy Industries shipyard, with the sixth and final vessel in the series delivered in January 2018.
Tung said that once the slew of newbuildings due for delivery this year were in service, the supply-demand fundamentals for shipping lines would improve.
“Once the large new vessels scheduled to be delivered in 2018 have been brought into service, with a comparatively low order book for 2019 and 2020, and taking into account the improved economic data, we are hopeful that the industry may start to enjoy greater stability than it has done for many years,” he said. “In the meantime, we maintain a positive, if somewhat cautious, stance.”
OOIL reported that a profit attributable to equity holders for 2017 of US$137.7 million, compared to a loss of US$219.2 million in 2016. Revenue increased from $5,298m in 2016 to $6,108m last year.
“The economic backdrop for 2017 was more robust than forecasters had expected,” said Tung. Following a decade of low growth, we saw healthier performance in both GDP and trade volumes across most of the world’s major economies. This was a welcome change after the industry’s low point of 2016.”
The result was aided by rapid growth on both European and US-bound trades - OOCL’s liftings were up 3.6% overall, but surged 16.3% and 19.7%, respectively, on the key head-haul Transpacific and Asia-Europe
Ahead of OOCL’s purchase by Cosco, a deal which received a greenlight from European competition watchdogs last month, Tung said the line had also benefited from its membership of the Ocean Alliance.
“One of the cornerstone strategies for many years of the OOIL group has been to work in alliance,” he added.
“We are now almost into the second year of the Ocean Alliance with COSCO, CMA CGM and Evergreen. Alliance membership continues to deliver meaningful benefits in terms of network and scale, and very much remains part of delivering our growth strategy.”