CC Tung, the veteran chairman of Hong Kong liner Orient Overseas Container Line (OOCL), has outlined why he felt he had to sell his company to China’s Cosco Shipping and Shanghai International Port Group (SIPG). Tung, speaking at OOCL’s interims, said that the dramatic consolidation seen within the liner sector had left his company without the necessary capital base to compete with larger companies whose fleet size were now more than double his own.
On July 9, it was revealed that Cosco and SIPG had made a $6.3bn bid to take over OOIL, the parent of OOCL, putting an end to months of rumours over the sale of the Hong Kong-listed liner.
Tung, 74, said: “[A]s 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.”
OOCL’s fleet size today stands at 655,746 slots.
Tung said that all the consolidation seen within the container shipping space over the past couple of years might create a more stable industry over time.
OOIL revealed a net profit of $54m at its interims, a significant turnaround from the $57m loss it made this time last year.
On the markets, Tung was cautiously optimistic, pointing out that for the first time since Lehman Brothers collapsed nine years ago the supply demand situation was not worsening.
“This steady improvement in the supply demand balance is not a sign of a booming market – we are far from that,” he cautioned, adding: “However, it does mean that for the first time since the onset of the global financial crisis, the supply demand balance is not worsening year on year. This is a significant shift, and if it holds, then the industry will at least have the chance to start to absorb some of the excess capacity that exists.”
While the Tungs are selling OOCL, they are not exiting shipping, retaining their privately held Island Navigation, a firm with a focus on product tankers and bulkers that has become increasingly active over the past 18 months.