ORIENT Overseas (International) Limited , parent of OOCL, saw its container and logistics business EBIT margin fall from 25.3% in 1H 2023 to 18.9% in the equivalent period this year, or EBIT of US$878 million.
This came despite liner liftings growing to 3,677 million TEU (1H 2023 3,600 million TEU) on a slightly reduced loadable capacity of 4,388 million TEU versus 4,429 million TEU last year. Operating capacity increased to 1,001 million TEU as the company took delivery of the seventh to eleventh of a series of twelve 24,188 TEU new-builds from Chinese yards.
OOCL saw revenue rise from US$4,541 million in 1H 2023 to $4,646 in 1H 2024 but profit was down from US$1,134 million to $835 million.
Although the bunker price fell slightly by 3%, the total bunker cost increased by 13% as fuel oil and diesel consumption increased by 17% in the first half of 2024 compared to the corresponding period in 2023. The increase in bunker consumption is attributed to the vessels sailing in the Asia-Europe trade being re-routed to the Cape of Good Hope due to the situation in the Red Sea which began towards the end of 2023.
“The sudden incident around the Red Sea ended the hovering low market levels, and the market rebounded sharply as we entered the traditional peak season,” OOCL said. “There was a short quiet season just right after 2024 Chinese New Year, where we saw delivery of many new ships and the oversupply resulted in downward pressure. Eventually, concerns over supply chain disruption and continuously strong demand again resulted in rebound for most routes, and repeatedly breaking new Shanghai Containerised Freight Index records since 2023.
“The recent supply chain disruptions were primarily due to the ongoing situation in the Red Sea. In order to maintain schedule reliability, the additional distance to circumnavigate through the Cape of Good Hope instead of going through the Red Sea meant that liners had to deploy additional capacity. Other factors such as poor weather, backlog of cargo, arrival of delayed vessels together and surge in the transhipment volume, resulted in different level of congestions at some ports, which have made more capacity stuck there.
“All these in some ways provide an explanation for why effective supply remains low despite the rapid increase in nominal capacity. New supply chain risk management requirements and geopolitical factors have reshaped existing trade patterns, that brings the need to further optimise our network to cater emerging markets such as India, Vietnam, and Latin America, which in turn brings new challenges on supply chain management.”
OOCL says the dual-brand strategy [with COSCO Shipping] continues to play a pivotal role, not only in dealing the Red Sea disruption and port congestions “where we realised cost minimisation and efficiency gain through synergies, but also in emerging market and niche market, in the form of the dual-brand and Ocean Alliance, allowing us to rapidly extend our network and to better serve our customers. We believe that the company will continue to achieve greater results under this strategy.”
“Looking ahead, although rates are still relatively high at the moment, uncertainty remains the norm. How long will such demand dynamic be maintained can be one of the key factors that significantly influence the market’s short and long-term expectations, economic trends and trade patterns can also impact the market to various extents.
“On the other hand, lessons from the pandemic and Red Sea incident have taught us that the supply chains are very susceptible to geopolitical risks. As new ships continue to be delivered, capacity remains a key concern for the market, and the situation of the Red Sea will continue to be a dominant factor on it. Other regional factors shouldn’t be ignored also, such as the US East Coast labour discussions as how it develops may affect the entire supply chain.”
