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The chairman of one of Asia’s biggest container shipping companies has given the gloomiest assessment yet of the sector’s future by a senior industry figure, after Orient Overseas International announced $401m losses for 2009.
CC Tung, whose family controls the Hong Kong-listed company, warned that the recovery of the world economy and consumer demand were likely to be sluggish, while there continued to be an excess supply of ships worldwide.
The excess ships, either under construction at shipyards or laid up out of use, would need to be absorbed over the next three to four years, he said. Prices would fall further if operators brought currently idle ships – which account for about 10 per cent of current world capacity – back into service too quickly.
“An imprudent reintroduction of capacity currently idling or laid up, if mismatched to demand, could see fresh rounds of rate cutting,” Mr Tung said.
OOIL owns OOCL, which operates the world’s 13th-largest container ship fleet and was for many years consistently among the sector’s most profitable large operators. Senior container shipping executives are sharply divided between pessimists over the sector’s immediate outlook and those who insist the industry has now pulled through the worst crisis in its 53-year history.
A number of lines – including Germany’s Hapag-Lloyd, Israel’s Zim and Chile’s CSAV – have all needed emergency rescue packages to survive the slump caused by falling traffic and a huge over-supply of ships. France’s CMA CGM has still to announce a badly needed restructuring deal for its obligations.
The loss for the year compared with pre-tax profits of $276m in 2008 and was struck on revenues down 33 per cent to $4.33bn. The number of containers carried fell 14 per cent to 4.16m twenty-foot equivalent units (TEUs), while revenue per TEU fell 25 per cent to $924. Overall operating capacity fell 16 per cent to 313,126 TEUs as the company handed ships chartered from other companies back on the expiry of charters.
The year had seen the worst market conditions ever experienced in the container shipping industry, Mr Tung said.
“The year opened with a collapse in container freight rates as excess shipping capacity chased a dearth of demand volume,” he said.
In January, OOIL announced the sale of most of the mainland Chinese property interests for $2.2bn. The sale would allow the company to redeploy capital and become a focused container shipping and logistics group, Mr Tung said.
The income will allow OOIL to pay off all the $1.2bn net debt it carried at the year end.
OOIL’s shares fell 2.85 per cent to HK$58.