OOCL suffer in over-saturated market


Orient Overseas Container Line (OOCL) has reported a scathing 90 percent drop in net profit over the 2013 financial year.

Despite the US$22.6 million losses recorded in the first quarter of the year, OOCL, a subsidiary of Hong Kong-based Orient Overseas (International) Limited (OOIL), was still able to announce an annual profit.

They are the second company so far to report a profitable financial year alongside shipping giants Maersk Line, after a year where capacity exceeded demand.

The group took delivery of eight 13,208 TEU ‘Mega’ class new-builds and two 8,888 TEU ‘SX’ class vessels during the year, representing a 9.7 percent increase in net operating capacity from 2012.

However with supply at 5.7 percent and demand at 4.3 percent, the vessels were found to be more a hindrance than a help.

This was ever-present in the Asia-Europe trade lane, where the new-builds were deployed. Such overcapacity resulted in a ‘cascade’ effect, whereby a number of vessels were diluted into other routes to make up for the over-saturation of the market.

Chairman of OOIL, Mr C C Tung, states “The deployment of the largest newbuildings to the Asia-Europe trade triggered cascading into the Trans-Pacific trade, which in turn further displaced a considerable number of mid-sized ships to other trade lanes. This cascading effect brought considerable excess capacity to the Intra-Asia and Australasia trades as well as the Trans-Pacific trade, and added volatility to the market.”

This overflowing meant that the maximum capacity in intra-Asian routes doubled to nearly 1.7 million TEU for the year, around 53 percent of the company’s total volume.

This caused further complication as it was found that only 36 percent of the annual revenue came from the area.

However, this situation has begun to resolve itself with the rebound of Trans-Pacific and Asia-Europe trade volumes recovering later into the year, increasing OOCL total lifting’s by 10 percent, when compared to that of the previous year.

In 2014, OOCL are hoping to see a full return from the mega class new builds delivered in 2013, as demands steadily follow a road to recovery, outpacing that of the previous year.

OOCL are hoping that the recently reactivated tri-weekly Far East-India subcontinent slot exchange agreement with Maersk Line and APL will ensure a further 20 percent in market share.

Daily Email Newsletter

Sign up to our daily email newsletter to receive the latest news from Port Technology International.

Supplier Directory

Find out how to get listed

Webinar Series

Find out how to attend

Latest Stories

Cookie Policy. This website uses cookies to ensure you get the best experience on our website.