OOCL Looking into More Alliances to Keep Scale

As yet another tough year unravels for the container shipping industry Hong Kong’s Orient Overseas (International) Limited says it would continue searching for alliance opportunities in the container shipping sector to save costs.

Commenting on the company’s full year results for 2015, Chairman of OOIL, Chee Chen Tung said that OOCL has participated in alliances for decades adding that the group “continuously seeks to identify opportunities for additional efficiencies and savings through these arrangements.”

“We continue to believe that alliance structures are an important means of achieving scale and enhancing product quality,” Tung noted.

The announcement comes as reports emerge on the forming of a new mega alliance among container shipping majors, namely, French CMA CGM and China COSCO, who are said to be targeting Evergreen and OOCL to join the group.

According to Alphaliner, OOCL is understood to be reviewing its options after a high-level meeting with CMA CGM and COSCO in late January.

The new structure is likely to be formed once the Ocean Three and CKYHE deals expire in 2016 and 2017 respectively.

According to Tung, moving ahead, scale will continue to be a key driver of sustainability in the industry.

“A key part of how OOCL achieves scale is through having the right fleet, with modern and fuel efficient vessels built to the right size and specifications, driving unit cost efficiency even at today’s lower fuel prices. We are delighted with the better-than-expected efficiency gains achieved through our 13,208 TEU vessels replacing smaller vessels on certain routes, and look forward to enhancing these benefits of scale further with our larger vessels, as they enter into service in 2017,” continued Tung.

During 2015, the group took delivery of four SX class 8,888 TEU new vessels from Hudong-Zhonghua Shipbuilding in China and ordered six 20,000 TEU class vessels at Samsung Heavy Industries Co. slated delivery in year 2017.

The group reported a profit attributable to equity holders for 2015 of USD 283.9 million, compared to a profit of USD 270.5 million in 2014.

“For the full year 2015, OOCL’s liftings were essentially flat, with a drop in revenue, and of revenue per TEU of 10%. This reflects the challenging environment, particularly as the very tough second half took hold,” Tung, remarked.

The group expects its Middle Harbor Redevelopment Project in California to enter into the first phase of its operation in 2016.

“While the final completion of the project is not scheduled to occur until 2020, we fully anticipate that even from 2016 we will start to reap benefits from this large capital investment,” Tung said.

Speaking of 2016, Tung noted that the first quarter has so far been characterised by great uncertainty which is to resume throughout the year amid reduced global economic growth forecast and anticipated entrance of new shipping capacity into the global fleet.

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