Orient Overseas Container Line (OOCL) said that while challenges remain for the container shipping industry, the market is "very far from disaster territory."
OOCL's parent firm, Hong Kong-listed Orient Overseas International (OOIL), made the comment as it reported the company's first-half performance, showing profit attributable to equity holders of US$1,128.7 million, compared to a profit of US$5,663.6 million for the same six-month period in 2022.
"As was clearly to be expected, the extraordinary market conditions of the past two to three years came to an end. The long, steady decline in freight rates, which began around the middle of last year, continued during the first half of 2023," OOIL said.
It added that the fall from the "great heights of 2020-2022 has certainly been spectacular in terms of both absolute dollar value and in terms of percentage, but this is simply a reflection of just how high the freight market had risen."
OOIL noted that, nonetheless, freight rates are, broadly speaking, around, and in some cases above, the levels they were at pre-COVID-19 before global reactions to the pandemic created the exceptional container shipping market conditions of the past few years.
For the period, OOCL's total liner liftings for the first half of 2023 reduced by 1% compared to the same period in 2022, and total revenue decreased by 60%, resulting in a 60% decrease in revenue per TEU.
Loadable capacity reached 4.42 million TEU, up from 4.22 million TEU a year ago.
OOCL took delivery of the first two 24,188 TEU new-build vessels from Nantong COSCO KHI Ship Engineering Co., Ltd. (NACKS) and Dalian COSCO KHI Ship Engineering Co., Ltd. (DACKS), respectively, in the first half of 2023.
It said the delivery of the remaining new buildings of the same series will be delivered from the 2023 third quarter to the 2024 third quarter.
Despite increased consumer caution and slowing demand for products, OOCL said its ocean freight business revenue has returned to the "normal level" of previous years, while increases were noted in handling volume in TEU.
Challenges remain ahead
"Looking forward, no matter the more positive sentiment in recent weeks, particularly on routes to the US West Coast, we must be clear that there remain challenges ahead," OOIL said.
It added that the "conflicting positive and negative signals" that have made forecasting so difficult in the past 12-24 months "remain firmly in place."
"Certainly, the market is very far from being in disaster territory, and of course, there are some indications that demand is improving and that shipping companies are behaving rationally in the face of fluctuating demand — all of this is reassuring. However, undeniably, there are risks associated with the impact of inflation and higher interest rates on consumer spending and from the unclear economic outlook," OOCL's parent company further said.
It noted that there is also the "uncertainty of not knowing exactly what the net fleet growth, in terms of effective capacity, will be in the coming months and years."
"No one can predict with accuracy the extent to which, in any given period, capacity from new deliveries will outpace the loss of capacity driven by scrapping and speed reductions, whether for CII/EEXI compliance or simply for cost reasons," OOIL added.
At the time of writing, it said that its ships are sailing full on its main long-haul trade lanes and are forecast to continue to be fully loaded in the coming weeks.
OOIL further noted that US West Coast rates have indeed risen, as one might expect at this time of year. Similarly, Asia-Europe rates are currently holding and, in some trade lanes increasing.
"Nonetheless, a cautious outlook is appropriate, given the challenges and uncertainties that abound," the firm said.