Expeditors 'adapted well in an erratic quarter' – but earnings disappoint
Expeditors’ Q2 results will have left investors disappointed, with softer-than-expected earnings and a “still-heavy” cost ...
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By Mike Wackett
Ahead of most ocean carrier third-quarter results, data from OOCL indicates that the liner industry’s financial performance in the second half of the year may ultimately be worse than feared.
Moreover, with the potential for significant losses in the final quarter, and an estimated armada of 2.4m teu of newbuild tonnage hitting the water by Q2 24, panic signs are flashing red in the boardrooms of carrier offices.
Orient Overseas International Ltd (OOIL), a subsidiary of Cosco Shipping, has released the Q3 operational data for its container arm, OOCL, providing further evidence of the sharply deteriorating liner market.
OOCL’s Q3 revenue plunged 65%, compared with the same period of 2022, to €1.75bn, from €5.04bn, despite 13.6% growth in the carrier’s operating capacity.
And its average revenue per teu across all its tradelanes collapsed to just $943 per teu, compared with $2,886 in Q3 22.
Freight rates have declined dramatically on virtually all trades, slumping from the extreme highs that made the sector billions of dollars of profit in the past two years, through the normalisation barrier that carriers (and analysts) did not expect to be breached, into the current sub-economic trading, taking some rates down to levels not seen since 2018, when operating costs were 30% lower.
Notwithstanding the collapse in headhaul rates, backhaul rates on trades such as North Europe to Asia are, effectively, being subsidised by carriers in order to enable the restitution of containers to the Far East, resulting in negative earnings for the lines.
Nonetheless, some carriers are continuing to fight to increase market share.
Indeed, OOCL’s transported volume increased by 6.7%, compared with an industry par of approximately 2%, to 1.87m teu, suggesting the carrier needed to adopt an aggressive booking strategy across its four regions to fill the extra slots.
OOCL’s biggest market, the intra-Asia/Australasia trades, accounted for 47% of its business in Q3, with 875,423 teu of liftings, and showed year-on-year growth of 5.5%. This was followed by the transpacific, at 26%, with carryings of 477,425 teu, up an impressive 13.8% on the same period of the previous year.
On the Asia-Europe trades it recorded 394,538 teu, 21% of its liftings, showing a 2.5% increase on the previous year.
OOCL’s smallest trading region, the transatlantic, saw 6% of its liftings, at 118,076 teu, a 3.6% improvement on the previous year.
However, in terms of revenue the transpacific was OOCL’s biggest earner in Q3, with revenue of $629m – albeit slumping 67.1% on the previous year, for an average rate of $1,318 per teu, versus a very healthy $4,564 in Q3 22.
Intra-Asia/Australasia revenue came in at $593m, down from $1,459,261, for an average of $678 per teu, compared with $1,759 previously. And for Europe, OOCL’s freight revenue was $376m, compared with $1,300,239 in Q3 22, for an average of $954 per teu, versus $3,378.
Transatlantic revenue was $160m, compared with $370m, for an average of $1,359 per teu, compared with $3,248.
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