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OOCL sees growth ahead on improving fundamentals

Hong Kong-based Orient Overseas Container Lines (OOCL) sees improving market fundamentals and saw the year ahead as one of growth for the group.

At a media briefing cfo of OOCL parent group Orient Overseas (International) Ltd Alan Tung cited these improving fundamentals as synchronized global growth, improved supply-demand fundamentals and limited new build ordering.

Noting that the new building order book has “calmed a bit” he added that “supply has plateaued out a bit more”.

Group chairman CC Tung warned however that supply side growth continues across the trade lanes, with capacity rising as the new megabox ships start to be delivered.

“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,” said Tung. OOCL itself has taken delivery of all six of its Giga Class 21,413-teu vessels over last year and the beginning of 2018.

“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.

Cfo Alan Tung said 2017 was a positive year for liftings. “The industry has passed the bottom point,” he noted.

There was especially good growth in both European and US bound trades, which rose 16.3% on the Transpacific and 19.7% on the Asia-Europe trade lanes. This growth outpaced the already strong volume growth seen in the market as a whole, where OOCL’s liftings rose 3.6% overall in 2017.

Meanwhile OOCL continues to rebalance its portfolio of revenue drivers. While revenue from the lower yielding Intra-Asia segment has slid, this has been more than made up by the Transpacific and Asia-Europe trades taking up a greater share of the pie.

More importantly, the cfo noted, this growth came along with a 16% rise in revenue for the segment to $5.5bn and a 12% rise in revenue per unit to $868. This result is particularly impressive in the light of the sharp spike in capacity during the year, which rose 22% to 698,401 teu.

Addressing the issue of the 1.2 percentage point drop load factor to 83.7%, he said: “We can’t be blindly chasing utilization because it will affect revenues. Bearing in mind this is a year where we had very large growth in long haul capacity, I think we did a pretty good job of balancing unit revenue against utilization.”

The group also was optimistic about the progress made on the Long Beach Container Terminal, where Phase 2 came online in the fourth quarter of 2017 bringing capacity up to 2m teu. This will be further increased to 3.3m teu when Phase 3 is completed in 2021.

“It’s a good and efficient terminal and we expect it bring a meaningful contribution to the group’s bottom line,” said the cfo.

“We are delighted with the progress made so far, and already feel the benefit of greater efficiency through welcome cost gains,” said OOIL’s chairman.

CC Tung also highlighted the benefits of being part of an alliance. “One of the cornerstone strategies for many years of the OOIL group has been to work in alliance. 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,” Tung said.

“Against this gradually improving economic background, and in the context of a consolidating industry, the future for OOIL appears to be promising.  We are well placed to continue to grow, and look forward to maintaining our track record of being amongst the most consistently highest performers in the industry,” Tung concluded.

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