By Mike Wackett
Ahead of its acquisition by COSCO, ocean carrier OOCL’s carryings jumped 7.5 per cent year on year, to 1.58 million TEUs, in the first quarter, while revenue surged 16 per cent, to $1.38 billion. According to the operational numbers at least, Hong Kong-based OOCL enjoyed a better and more profitable quarter than its suitor.
On the transpacific tradelane, its second-biggest trading region after intra-Asia/Australasia, OOCL achieved liftings growth of 16.3 per cent, to 457,461 TEUs, with revenue improving by 19.2 per cent, to $529 million.
Asia-Europe trade leapt 20.5 per cent, to 302,679 TEUs, with revenue 23.8 per cent higher at $281 million, and although intra-Asia/Australasia throughput declined 1 per cent, to 716,390 TEUs, OOCL still managed to earn more, increasing revenue by 13 per cent to $398 million.
Overall average revenue per TEU increased by 8.3 per cent per TEU, compared with Q1 2017. Vessel utilisation was down 6.4 per cent, but this was a “satisfactory achievement”, given that OOCL’s capacity increased by 16 per cent as new ultra-large container vessels were delivered.
For the full- year 2017, OOCL carried 6.3 million TEUs on its liner services, producing revenues of $5.4 billion. Its parent company, OOIL, posted a full-year net profit of $138 million – reversing a loss of $219 million incurred the previous year.
Meanwhile, China state-owned COSCO saw profits slump by a third, year-on-year, in the first quarter, to $28.4 million, despite an increase in liftings, as it focused on growing market share. It loaded 5.2 million TEUs on its vessels in the first three months, representing a near 12 per cent jump on the previous year and significantly ahead of par for the market. The Shanghai-listed carrier also returned to the black last year, posting a net profit of $264 million after a loss of $1.1 billion in 2016.
Assuming the $6.3 billion purchase of OOIL is completed, COSCO will hold 90.1 per cent of the shares, while compatriot container terminal operator Shanghai International Port Group (SIPG) will acquire the balance of the stock. According to the terms of transaction, the deal must be completed by 30 June or OOIL could be entitled to a break fee of around $250 million, and it appears the deal could potentially be blocked at the eleventh hour by U.S. national security issues.
According to a transaction update last month from COSCO’s Vice-Chairman, Huang Xiaowen, the company was still answering questions from the Committee on Foreign Investment in the U.S. (CFIUS) relating to assets OOCL owns in America. In the past year, CFIUS has vetoed a number of deals involving Chinese buyers on the basis of a “threat to national security”. In this case, the sticking point seems to be OOCL’s Pier E/Pier F Long Beach Container Terminal. This would pass into Chinese ownership, adding to the group’s controlling interests at two other container terminals in the Los Angeles-Long Beach San Pedro Bay port complex.
According to Alphaliner, to appease the concerns of CFIUS, COSCO might be prepared to spin-off its LA/LB terminal concessions “in order not to risk or delay the overall merger with OOCL”.
Elsewhere, Hapag-Lloyd is scheduled to publish its Q1 results on 14 May and market leader Maersk on 17 May. The normal transparency and outlooks provided by the German and Danish carriers will give an insight to current and future trading conditions in liner shipping. Of concern to ocean carriers is softening container spot rates in Q1, while fuel costs and vessel chartering expenses have escalated.
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)