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OOCL results signal healthier-than-expected first half for box trades

      07/30/2019

Cosco’s subsidiary ocean carrier, OOCL, increased its liftings by 3.2% in the first six months of the year, compared with the same period in 2018, to 3,374,412 teu with revenue up 6.5% to just over $3bn.

The carrier said that during the period, capacity increased by 4.3% and average revenue per teu was up 3.3%, although its overall load factor per vessel slipped marginally, by 0.9%.

OOCL’s quarterly operational updates are a customary forerunner to the financial interims from the liner majors and provide an insight into the health of the respective markets.

The numbers suggest that, depending on carrier focus on regional sectors, the results for the second quarter could be better than some analysts have predicted.

According to New York-based consultancy Blue Alpha Capital, the partly-estimated collective net loss of the top 12 carriers in the first quarter was $728m and, given the further erosion of spot rates in the following quarter, expectations of a recovery had not been high.

With the exception of Hapag-Lloyd, which posted a net profit of $103m, China state-owned Cosco (including OOCL)’s positive $82m and Evergreen’s virtually breakeven result, all carriers emerged from the quarter in the red.

Some 44% of OOCL’s business comes from its intra-Asia and Australasia regional trade which recorded a 2.6% increase in liftings on H1 18, to 1,498,612 teu, and a 4.7% improvement in earnings, to $938m.

The transpacific is its second-largest trade, where revenue was ahead 5.8%, to $1.19bn, an impressive return from a 2% reduction in liftings of 943,691 teu.

On the Asia to US headhaul, the carrier benefited from higher rates in the two quarters as a legacy of the front-loading of containers to beat the US government’s duty hikes on Chinese imports, which spiked rates.

However, since early January, spot rates to the US west coast have slumped 26% from their peak, and slipped by a more modest 10% for US east coast ports.

On the Asia-Europe trade, which accounts for around 21% of OOCL’s business, liftings increased by 8.5%, to 691,815 teu, although the 5% revenue improvement to $613m will be a disappointment, although it does reflect the structural problems of the under-pressure tradelane.

The soft demand, especially for the Asia-North Europe route, has continued into the third quarter and the peak season, leading carriers to withdraw around 150,000 teu of capacity this month and next.

On Friday, OOCL announced it was voiding its Loop 4 westbound sailing to North Europe on 15 August, along with one Asia-Med and one Asia-East Med & Black Sea sailing “in response to the expected low demand in the market”.

However, there was a strong performance by OOCL in its smallest sector, the transatlantic, which accounts for just 7% of its trade. Liftings were up 14.9%, to 240,294 teu, and revenue jumped 20.1%, to $295m.

Cosco’s completion of its $6.3bn acquisition of OOCL parent Orient Overseas International Ltd in July saw it overtake CMA CGM to become the world’s third-largest carrier.

Hapag-Lloyd will report its first-half results on 7 August, followed by Maersk, which is scheduled to publish its interims on 15 August.