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OOCL Q1 results a boost for lines or a portent of harder times to come

Initial results for the first quarter released by OOCL could be seen as a boost to lines, which it is generally agreed have manged the downturn caused by the Covid-19 pandemic well, or as a warning of tougher times to come.

Globally the FBX index shows that rates have remained stable and that the Asia to US West Coast rates have fallen only 1% over the last week, while Asia to Europe rates have recorded a small increase, also 1%.

OOCL, for its part, has released its Q1 figures without more than a cursory comment, “For the first quarter of 2020 (ended 31st March 2020), total volumes were 0.4% down from the same period last year. Total revenues increased by 5.5% to US$1,540.3million. Loadable capacity decreased by 1.7%. The overall load factor was 1.1% higher than the same period in 2019. Overall average revenue per TEU increased by 6.0% compared to the first quarter of last year.”

The devil, as they say, is in the detail. OOCL’s volumes in the intra-Asia and Australasia trades has seen a 4.5% decline, but revenues increase 10.8%. A measure of the success that the lines have had in maintaining their income during the initial period of the pandemic.

However, OOCL’s greatest volumes are shipped to Europe and the US, including on the Transatlantic trades. All of these trades have shown marked volume and revenue increases in the first three months of the year compared to Q1 in 2019. Except Transpacific revenues which remained neutral year-on-year.

The Sunday Spotlight has chronicled the cancellation of sailings over the period of the pandemic and this week’s issue reveals the number has risen to 460 cancelled voyages. But perhaps the most significant commentary this week from Sea-Intelligence is that the demand economies are only now entering an extended period of contraction.

Source Sea-Intelligence.

“Asia-North Europe last week reached 38% cancelled capacity, and in the coming weeks the other deep-sea trades will also reach peak impact with, for example Mediterranean to North America East Coast having 33% blank capacity in week 19 and Asia to East Coast South America seeing a staggering 59% capacity removal in week 20,” according to the Sunday Spotlight.

Blanked sailings on the Pacific will see 29% less capacity heading for the West Coast and 31% for the US East Coast.

Demand in the headhaul trades on the Pacific and Asia-Europe trades will likely see revenues fall through a decline in volumes, with a similar transaction taking place on the Atlantic trades.

According to Sea-Intelligence its tracker shows that we are at the peak period of impact in terms of cancelled sailings during this pandemic, but the impact on the supply chain will be extended into the second quarter with exports competing for space with empty containers.

A phenomenon already experienced in the Mediterranean to Asia trades where rates reached a low point for this year at the end of February, with rates falling to US$455/FEU and had rebounded to US$940/FEU by 24 April, according to the FBX.

Sunday Spotlight reports, “In the coming 6-8 weeks we could very well see a period where the export cargo and empty flow combined exceeds the total capacity available in the market. Historically this has led the carriers to favor empty container evacuation and curb booking intake with rising freight rates as a result.”

 





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