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Boxship outlook to remain grim for rest of the decade: CC Tung

CC Tung, the veteran chairman of Orient Overseas Container Line (OOCL), has warned of a very challenging demand side for box shipping for the coming five years.

OOCL slid into the red while announcing interims today – chalking up a net loss of $56.7m compared to a $238.6m profit in the same period last year.

Compared to the first half of 2015, OOCL liner liftings increased by 5% and load factor by 1%, but revenue dropped by 17%. Average revenue levels in some trade lanes reached new post-global financial crisis lows, with an average revenue per teu drop of 21% in the first half.

Tung, 73, who has been chairman of the Hong Kong liner since 1996, was downbeat on any swift turnaround in fortunes.

“The industry continues to face a supply and demand imbalance. While the orderbook as a percentage of existing fleet is anticipated to drop to 6.7% and 5.5% respectively in 2017 and 2018, the challenge for the next half decade is on the demand side,” Tung said, adding: “The world economy seems uninspiring at best. The US may have passed its most difficult period in this cycle, and China will likely avoid a hard landing. Even if Europe finds its footing in the aftermath of Brexit, the world may very well need to adjust to a ‘new normal’ where unexciting growth and a low interest environment become the norm, at least for a half decade. In the mean time, the polarisation of domestic politics, the rise of populism, and the tendency towards ‘turning inwards’ for many nations may also translate into a slow down in the velocity of globalisation.”

OOCL will switch alliances next April, linking up with China Cosco Shipping, Evergreen and CMA CGM to form the new Ocean Alliance.

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Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

Comments

  1. “In the mean time, the polarisation of domestic politics, the rise of populism, and the tendency towards ‘turning inwards’ for many nations may also translate into a slow down in the velocity of globalisation.””

    That sums it up nicely. Very well said, Mr Tung.

    It’s all a bit like the 1930’s, which is not a very encouraging thought.

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