The Only Way Back
On June 10th it was announced that Orient Overseas Container Line (OOCL) took first place in the annual ocean carrier performance survey taken among members of th Agricultural Transportation Coalition.
That may be the last pat on the back OOCL will ever get.
1. On July 20th, The Journal of Commerce reported that OOCL was forecasting a “disappointing” full year even after the shipping line’s second-quarter container volume and revenue increased. The Hong Kong-based carrier said “difficult” trading conditions in the first quarter continued in the second quarter as freight rates on east-west trade lanes deteriorated, particularly on the Asia-Europe trades.
And on August 9th, Cargo Business Newswire reported that OOCL reported a precipitous 86 percent drop in its first-half net profit to $ 176 million compared to the same period a year ago, amid declining freight rates in a softened global economy.
2. Well, if carriers are hurting, how about the container ports? Hutchison Whampoa, the parent of Hutchison Port Holdings (HPH) is feeling the pain as much as anyone. Based in Hong Kong, HPH is the second-largest international port operator – after Singapore’s PSA – and has operations in 25 countries, but its operating profit declined 20 percent in the first six months of 2011 compared to the same period last year.
3. And dry bulk carriers? In the August 10th issue of The Journal of Commerce it was reported that China Cosco Holdings was anticipating a loss for the first half of 2011 because rising fuel costs were eroding the largest international bulk carrier’s earnings. The carrier posted a profit of $ 540 million in the same period a year ago.
When it rains it pours. A Cosco ship was arrested last month in Singapore by one of the companies seeking $ 8.6 million from the Chinese line, and on August 9th , Bloomberg News reported that a second vessel has been arrested in Louisiana because of overdue payment..
Both cases concern ships chartered by Cosco on long-term contracts before a plunge in rates caused by slowing demand and rising capacity. In the Singapore case, Cosco was paying $ 87,000 a day for the vessel, or about eight times the current rates.
Plunging rates are caused by a slowing demand, and when you throw unneeded capacity into the mix, you end up with crushing problems. Will the maritime industry ever recover? That’s what keeps CEOs awake at night. When Mr. Kolding, Maersk’s CEO, admitted the need for change a few weeks ago, his new website received more than 1,000 serious but impractical responses.
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