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.