OOCL Earnings Preview Container Market Correction Ship’s crew

By Mike Wackett (The Loadstar) –

The first evidence of the depth of the freight rate correction for liner shipping is OOCL’s first-quarter operating numbers, which revealed a 58% slump in the airline’s revenue from a year earlier.

A few weeks ahead of other major airlines’ financial season releases, OOCL’s data is seen as a harbinger of container sector health.

Indeed, a collapse in freight rates from very high levels due to weak demand and overstocked inventories suggests airlines will report significantly lower first-quarter earnings.

OOCL saw the average freight rate on its lift operations fall to $1,252 per TEU in Q1, compared to the $2,873 per TEU it earned in Q1’22. The airline’s average rate for all of last year was $2,620 per TEU, but in the fourth quarter it was down $1,822.

Nonetheless, OOCL appears to have been fighting hard for market share during the period, with its total stocks for the quarter falling by a potentially above industry average of 3.2% to 1,738,096 TEU.

The largest sectors for OOCL continue to be Intraasia and Australasia, which accounted for 45% of volume in the quarter, and saw lifts down 4.3% to 775,955 TEU, representing 50% less revenue at an average of $959 per teu.

At 25%, the transpacific is the airline’s second-largest market and its on-route revenue collapsed 66%, with 6.4% less volume to 446,037 TEU, averaging $1,457 per TEU.

Asia-Europe accounted for 22% of OOCL production in the quarter at 387,871 TEUs, but revenue fell 68% to an average rate of $1,262 per TEU.

By far the smallest trade is the transatlantic, but here the airline saw lift operations increase 25% to 128,233 TEUs and revenue increase 5% to an average of $2,432 per TEU in the first quarter, reflecting higher capacity on the route .

Parent company Orient Overseas (International), a subsidiary of Cosco, reported total 2022 net income of 9.97 billion “at the earliest” in the second half of the year.

Nonetheless, it added that utilization factors across the OOCL network were showing “clear signs of improvement” and that freight rates “have started to stabilise.”

OOCL is currently taking delivery of a batch of 12 24,000 TEU vessels and has orders for 17 smaller vessels, including seven dual-fuel methanol vessels.

Collectively, Cosco Shipping Group operates a fleet of 465 vessels with a capacity of 2.9 million TEU, ranking fourth in the ranking of shipping companies behind its Ocean Alliance ship-sharing partner, CMA CGM over an order book of 49 ships for a capacity of 928,000 teu.

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