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OOIL clearly has great results but forecast cloudy

Hong Kong ocean carrier sees ‘array of conflicting signals that provide little clarity in terms of outlook’

First-half EBITDA nearly doubled, from $3.11 billion in the first six months of 2021 to $6.16 billion this year. (Photo: Shutterstock)

Orient Overseas (International) Limited (OOIL) said it scored the highest first-half revenue in its history but is unsure if it can maintain the record-breaking ways. 

The Hong Kong-headquartered ocean carrier announced a profit attributable to equity holders of $5.66 billion for the six-month period that ended June 30, compared to a profit of $2.8 billion for the same period in 2021.  

“The outstanding performance of the group was driven by the continuing extraordinary conditions prevailing in the container shipping market,” OOIL said in a news release. “As has been the case for over two years, our market is neither enjoying an extraordinary demand boom, nor suffering from any lack of vessels in deployment. 

“Rather, levels of demand, which are better than expected but not phenomenally strong, continue to outpace the effective level of supply, which is under significant downward pressure from a combination of congestion, delays and disruptions.”

The first six months of 2022 produced the highest half-year revenue in OOIL’s history, climbing from just under $7 billion in 2021 to $11 billion this year. Revenue per twenty-foot equivalent unit increased by 74%, OOIL said. 

Earnings before interest, taxes, amortization and depreciation also nearly doubled, from $3.11 billion in the first six months of 2021 to $6.16 billion this year. 

“Looking forward, we see an array of conflicting signals that provide little clarity in terms of outlook,” OOIL said. “Undoubtedly, there are legitimate concerns about the impact of inflation and interest rate rises on consumer spending in many key economies. Even if U.S. retail inventory-to-sales ratios remain low, we note some year-on-year increases in absolute levels of U.S. inventory. Indeed, some larger U.S. retailers have specifically reported that they are holding higher levels of inventory.

“Yet at the same time, consumers are still purchasing new goods, even if not necessarily the same goods they were buying last year, and thus far there has not been a complete return of pre-pandemic patterns of spending on services as opposed to goods. Furthermore, forecasts from various port and retail sources in the U.S. suggest ongoing resilience in the demand for imported goods.”

OOIL is the parent company of Orient Overseas Container Line (OOCL) and OOCL (Europe) Limited and is part of the COSCO Shipping Group.

OOIL said its ships are forecast to continue to sail fully loaded in the coming weeks. However, “there has not been much evidence” of a significant peak season uptick on the trans-Pacific trade route.

Headwinds in the first half of 2022 included the average price of bunker fuel, which was up year over year from $449 per ton to $729 per ton, OOIL said. 

“The price increase of 62% in the first half of 2022 has led to a 46% increase in total bunker costs for the first half of 2022, as compared to the corresponding period in 2021, even though consumption of both fuel oil and diesel oil were lower in the first half of 2022 than in the corresponding period in 2021,” OOIL said. 

OOIL said it received no newbuilds in the first half of the year and placed no orders for new ships. Twelve vessels, each with a capacity to carry 23,000 TEUs, were ordered in 2020 and will be delivered beginning next year. Ten 16,000-TEU container ships ordered in 2021 will be delivered beginning in the fourth quarter of 2024. 

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Click here for more American Shipper/FreightWaves stories by Senior Editor Kim Link-Wills.

Kim Link Wills

Senior Editor Kim Link-Wills has written about everything from agriculture as a reporter for Illinois Agri-News to zoology as editor of the Georgia Tech Alumni Magazine. Her work has garnered awards from the Council for the Advancement and Support of Education, the Georgia Institute of Technology and the Magazine Association of the Southeast. Prior to serving as managing editor of American Shipper, Kim spent more than four years with XPO Logistics.