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Orient Overseas International Ltd’s (OOIL) return to the black last year was achieved despite a loss of $12m by its container arm OOCL, ahead of its sale to Cosco.

Analysis of the OOIL 2017 accounts by Alphaliner reveals that OOIL’s net profit of $138m was achieved from its property and other businesses which contributed a gain of $150m.

However, OOCL comfortably outperformed the market with its year-on-year growth of 16.3% in the number of containers carried on transpacific routes and a 19.7% leap in liftings on Asia-Europe.

But the carrier’s average freight rate remained stubbornly low, at $861 per teu compared with the $1,002 recorded by Maersk Line and $1,051 by Hapag-Lloyd.

And the impact of higher fuel costs, of around $100 a tonne, negated any contract rate increases secured by OOCL last year.

Alphaliner also notes that OOCL’s load factors decreased by 3.5% last year on 2016, as the carrier took delivery of five of a series of six 21,413 teu ultra-large container vessels (ULCVs), part of its strategy to achieve lower unit costs than its peers.

On a standalone basis, OOCL suffered a loss of $274m in 2016 – a year which saw the bankruptcy of the world’s seventh biggest liner, Hanjin Shipping.

After the financial crash of 2009 OOCL had operated in the black for six consecutive years. Indeed, the Hong Kong- headquartered container line has long been regarded as one of the best in class in terms of financial astuteness. However, it was unable to match the cost competiveness of its top-ranked peers.

Speaking in August, OOIL chairman CC Tung explained the rationale behind the $6bn sale to China state-owned rival Cosco and port operator SIPG. He said: “For years, we have achieved scale benefits by means of alliance membership and the deployment of the right, often the largest, vessels in each tradelane.

“However, as the industry consolidates at speed, with the largest players now having millions of teu in carrying capacity, the capital base necessary to operate successfully, and to establish a place among the leading industry participants, is becoming increasingly sizeable.”

Hapag-Lloyd is due to release its full-year results on 28 March, which are not expected to show much improvement on the carrier’s modest $9m net profit recorded after nine months trading.

OOCL and Hapag-Lloyd’s ‘breakeven’ results and Maersk Line’s disappointing fourth-quarter profit of $91m is further evidence that the industry is far from a recovery. Furthermore, the liner industry faces a range of threats, including a further spike in oil prices and developing trade wars.

Meanwhile, although the OOCL brand will remain intact under its new ownership, it is clear that Cosco will be looking to trim costs, resulting in a number of office closures and staff redundancies.

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