By Mike Wackett
As a harbinger of ocean carrier interim results, OOCL’s operational H1 update paints a grim picture of the financial performance of the industry in the first six months of the year. The line’s average rate per TEU plunged 21.2 per cent, compared with the same period of 2015. The Hong Kong-based carrier recorded a 16.9 per cent decline in revenue on H1 2015, at $2.25 billion, despite a 5.5 per cent improvement in liftings, to 2,890,208 TEUs.
Tradelane carryings in H1 2016, compared with the same period of the previous year, improved by 14 per cent on the transpacific (702,728 TEUs), by 7.7 per cent on the transatlantic (193,973 TEUs) and by 4.5 per cent on its busiest routes, intra-Asia/Australasia (1,546,112 TEUs). However, on Asia-Europe, the carrier saw its liftings drop by 3.6 per cent on the previous year, to 447,395 TEUs, as the G6 alliance blanked and suspended sailings.
On the revenue front, OOCL’s H1 earnings from the troubled Asia-Europe tradelane plunged 28.6 per cent, on 2015, notwithstanding the supposed GRI-boosting effect of cancelled sailings on the supply/demand imbalance. One of the reasons for OOCL’s relative past success is that, in contrast to many of its ocean carrier rivals, only around 15 per cent of its carryings come from the Asia-Europe route, rendering the carrier less affected by the intense “race-to-the-bottom” rate wars in recent years.
However, the intra-Asia/Australasia tradelanes, which account for over 50 per cent of OOCL’s liftings, have also come under severe rate pressure this year, with revenue sliding by 14.7 per cent to $1.55 billion in H1, compared with 2015, despite a liftings increase.
Of particular concern for OOCL’s management will be the average freight rate slump of 21.2 per cent on the first six months of 2015, reducing the container line’s average rate per TEU to $778, versus $987 the year before. And, factoring in the steady rise in the cost of bunker fuel this year, the combination of lower rates and higher costs is likely to exert more pressure on the carrier’s bottom line as the H1 interim results are finalised.
Moreover, OOCL faces another eight months within the G6 alliance, before it joins the Ocean Alliance. This is bound to result in transitional costs well into 2017 as the new alliance beds in, making it imperative for OOCL that it succeeds in hiking its rates to sustainable levels in the next months.
Reprinted courtesy of The Loadstar (www.theloadstar.co.uk)