OOCL Earnings Preview Container Market Correction

By Mike Wackett (The Loadstar) –

The first evidence of the depth of the liner shipping freight rate correction comes with the Q1 operational numbers for OOCL, which revealed a 58% year-on-year slump in the carrier’s revenue.

Several weeks ahead of the financial earnings season publications from the other major carriers, OOCL’s data is regarded as a harbinger of the health of the container sector.

Indeed, a collapse in freight rates from highly elevated levels, driven by weak demand and overstocked inventories, suggests that the carriers will be reporting considerably reduced Q1 earnings.

OOCL saw the average freight rate on its Q1 liftings plummet to $1,252 per teu, compared with the $2,873 per teu it earned in Q1 22. The carrier’s average rate for the whole of last year was $2,620 per teu, but by Q4 that had declined to $1,822.

Nevertheless, OOCL appears to have fought hard for market share during the period, with its total carryings for the quarter down by what could turn out to be an above-industry par negative of 3.2%, to 1,738,096 teu.

The biggest sector for OOCL continues to be intra-Asia and Australasia, which accounted for 45% of its volumes during the quarter, recording a 4.3% drop in liftings, to 775,955 teu, carried for 50% less revenue at an average of $959 per teu.

At 25%, the transpacific is the carrier’s second-largest market, and its revenue on the route plunged 66%, with 6.4% less volume, at 446,037 teu, for an average rate of $1,457 per teu.

Asia-Europe represented 22% of OOCL’s liftings in the quarter, at 387,871 teu, but revenue sank 68% for an average rate per teu of $1,262.

By far its smallest trade  is the transatlantic, but here the carrier saw liftings jump 25% in Q1, to 128,233 teu, and revenue up 5% for an average of $2,432 per teu, reflecting more capacity deployed on the route.

Parent company Orient Overseas (International), a subsidiary of Cosco, reported a total net profit of $9.97bn for 2022, following $7.1bn the previous year, but said there were “challenges ahead” and that it did not expect an improvement in trading until the second half of the year, “at the earliest”.

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

OOCL is in the process of taking delivery of a series of 12 24,000 teu ships and has orders for 17 smaller vessels, including seven dual-fuelled methanol ships.

Combined, Cosco Shipping Group operates a fleet of 465 vessels, for a capacity of 2.9m teu, ranking it fourth in the carrier league table, behind its Ocean Alliance vessel sharing partner, CMA CGM, and has an orderbook of 49 ships, for a capacity of 928,000 teu.

Subscribe for Daily Maritime Insights

Sign up for gCaptain’s newsletter and never miss an update

— trusted by our 109,166 members