August 9th in SCM, Shipping by .

First Half of 2011 Is No Good For OOCL

Hong Kong-based carrier Orient Overseas Container Line (OOCL) fell 39 percent in the first half of 2011 on falling freight rates and OOIL forecast “difficult” conditions for the rest of the year because of excess capacity on major trade lanes.
Hong Kong-listed Orient Overseas (International) reported a $188 million profit in the first half of 2011, down from the same period a year ago even though revenue grew to $2.9 billion in the first half of 2011 from $2.7 billion last …

Hong Kong-based carrier Orient Overseas Container Line (OOCL) fell 39 percent in the first half of 2011 on falling freight rates and OOIL forecast “difficult” conditions for the rest of the year because of excess capacity on major trade lanes.
Hong Kong-listed Orient Overseas (International) reported a $188 million profit in the first half of 2011, down from the same period a year ago even though revenue grew to $2.9 billion in the first half of 2011 from $2.7 billion last year.

Despite the decline, the group said its profits were at an acceptable level. It said that the decline was primarily down to too much capacity being added to the market – particularity on Asia-Europe – rather than a softening of demand.

It added that capacity deployment issues in the industry were likely to continue in the near term, and the traditional peak-season lift in demand may provide only limited improvement, at best, in average freight rates over the remainder of the year.And it said there were concerns about how the economies of Europe and the US would perform as the year continued.

Chairman of OOCL’s parent firm, OOIL, CC Tung, said: “There is uncertainty as to how strong consumer demand in the US will be over the Thanksgiving [November] and Christmas retail selling seasons this year, following the recent termination of the US government’s fiscal and monetary stimulus programmes.

“While the economies of northern European countries are performing well, the support needed for those members of the Eurozone with excessive levels of sovereign debt may constrain consumer demand.

“Overall, this will make for continued difficult trading conditions in the second half of the year, with no relief from high oil prices and increased energy-related costs expected.”

The decline in profit should also be considered in the context of how other carriers have performed so far in 2011, with many seeing profits in 2010 turn into losses this year. In late July, MOL, K Line and NYK all posted losses for the first quarter of their fiscal year, while CSCL warned shareholders to expect a loss during the first half.

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