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OOCL threads fine line to profitability in container shipping

OOCL threads fine line to profitability in container shipping
In the race to chase higher volumes it is often forgotten that headline numbers are not the end all and be all of the shipping business. Hong Kong-based Orient Overseas Container Line (OOCL) with its latest set of results has proven that it is able to maintain the fine balance between utilisation and revenue.

Like many of its peers, OOCL saw a huge spike in capacity in 2017 as most of its six Giga-class 21,413-teu mega-boxships were delivered during the year. This led to net operating capacity jumping 22% to 698,401 teu.

Liftings naturally also rose 4% to 6.3m teu. And while there was a slight 1.2 percentage point drop in load factor to 83.7%, revenue rose 16% to $5.5m and revenue per teu rose 12% to $868 per teu.

“Bearing in mind this was a year where we had a very large growth in longhaul capacity, we did a pretty good job of balancing unit revenue against utilisation,” said cfo Alan Tung.

Expressing confidence in the group’s strategy he added: “I’m quite comfortable with that (load factor) given the large capacity increases. We can’t be blindly chasing utilisation because it will affect revenue.”

He suggested that when load factor stabilises in the future as the network improves, the group will see better revenue gains.

Not only is OOCL focussing on margins but it has also been diversifying and rebalancing its portfolio. Liftings on the more lucrative long haul trades were boosted, along with their percentage of the revenue pie.

Lifitngs rose 16.3% on the transpacific trade and by almost a fifth on Asia-Europe, while the percentage of revenue that came from the latter rose from 16% in 2016 to 20% last year and crossed the $1bn mark. Revenue from the transpacific trade meanwhile made up almost 40% of OOCL’s container segment revenue and passed the $2bn level.

The gains in these two segments came at the expense of the intra-Asia segment which made up 33% of revenue from 36% previously and the transatlantic segment which saw its share slide to 9%.

Tung also attributed OOCL’s success to its membership of the Ocean Alliance, which is now in its second year. He noted that it has enabled the group to gain access to new markets and attain volumes in key jurisdictions that the previous alliance it was in was not strong in. For example, it was able to maximise use of its bigger vessels on Asia-Europe and was running its 8,888 teu and 13,208 teu vessels on the trade to take advantage of recovering rates even while its biggest Giga class vessels were being phased in during the year.

Looking ahead, Tung said: “In 2018 we would expect the continued growth of the company, and especially on long haul, Asia-Europe and transpacific, we will continue efforts to grow.”

Calling intra-Asia “a more flexible type of market”, Tung said OOCL would see how the market reacts as the year progresses.

“It’s still early in the year but I would expect the overall growth rate to be no less than 2017,” Tung concluded.

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