Orient Overseas (International) Limited expects a mixed business outlook in 2023 which would be dependent on various global economic developments.
In a statement following the report of the company’s 2022 performance, OOIL — the parent company of Orient Overseas Container Line (OOCL) and OOCL Logistics — said the shipping industry could see a breather from recent supply-demand rout when economic concerns in key importing countries like the United States (US) have improved.
Nonetheless, other concerns about global interest rate rises and geopolitical instability continues to post uncertainties for the industry.
“The business outlook is mixed, and while we do not foresee any material change in the first half, the timing of any improvement depends on a long list of macro-economic factors as well as on the evolution of the relative growth of supply and demand,” OOCL said in a statement.
“What is certain is only that there will be challenges ahead,” it added.
OOIL announced a profit attributable to equity holders of U$$9.96 billion for 2022, compared to a profit of US$7.12 billion in 2021.
It noted that its 2022 results broke records anew after 2021 saw the highest-ever revenue, liftings and profit figures for its core container shipping and logistics business — also outpacing its 2020 performance.
“At that point, we could not have foreseen that the results for 2022 would once again break new records. The profits and cash flow that were generated by the results of 2022 put us in a very strong position to fund not only our continuing program of measured and intelligent growth but also to fund our ongoing investment in information technology and the digitalisation of our industry,” OOIL said.
Freight decline starts to stabilise
Meanwhile, the parent company of OOCL — one of the world’s largest container shipping companies — noted that the decline in freight rates appears to have normalised as it added that developments in the US could impact
“At the time of writing, it appears that this unmistakable downward trend of freight rates may have started to stabilise,” OOIL said.
“Even if we may reasonably expect occasional further falls during the seasonally quieter two to three months following the Chinese New Year holidays, weekly movements in spot rates are no longer as dramatic as they were during much of the second half of 2022, and load factors on some routes show clear signs of improvement,” it added.
“However, it seems unlikely that the general environment for the industry will change materially during the first half of 2023.”
“Thereafter, once importers in countries such as the US have made further progress in reducing their inventories, then if the economic outlook has improved, for example, if inflation has started to peak and if employment data remains strong, then we may see some improvement during the second half of 2023,” OOIL further said, although noting that “there can, however, be no certainty about that outcome, given the extent of perfectly valid concerns about the future impact of inflation, interest rate rises and broader economic and geopolitical instability.”
OOIL predicts that in 2023 and 2024, further supply increases will be created through the delivery of new ships — which could delay any improvement in the container shipping markets, even if the economic situation is more benign than anticipated.
“While mitigation of this risk from increasing supply most certainly does exist, through the increased likelihood of vessel scrapping, for example, and much more significantly from new environmental regulations, these will take time to be felt, and as such will not provide much counterbalance until the second half of 2023 at the earliest,” it said.
“In the meantime, during the first half, it may be that shipping companies will look at expected levels of demand and re-calibrate their services in line with the potentially reduced requirements of their own customer portfolio.”
Sustainable fleet expansion
In March 2023, OOIL said OOCL took delivery of the first vessel built for the Group since 2018.
The 24,188 TEU mega vessel, the OOCL Spain, and the 28 vessels that are scheduled to follow her over the next 5 years represent the next stage in our longstanding plan of measured and intelligent growth.
“Seven of the vessels still under construction will be Dual Fuel Methanol vessels, which puts us at the very cutting edge of environmental advances in shipping and is clear proof of our commitment to decarbonization,” OOIL said.
“Our substantial new building program is a clear indication of the intention of the COSCO SHIPPING Group, of which OOIL is an integral part, to be a leading player in the top echelon of the industry, and also of the whole Group's commitment to its very successful Dual Brand Strategy,” it added.
Aside from the growth in its ocean shipping for 2022, OOIL noted that based on the group’s performance, its logistics business — OOCL Logistics — “performed very well” last year.