Orient Overseas May Add Asian, Mideast Routes to Serve China, India Trade
Stock Chart for Orient Overseas International Ltd (316)
Orient Overseas (International) Ltd., Hong Kong’s largest container-shipping line, may add services on routes within Asia as the region’s economic recovery leads a rebound in global shipping demand and rates.
“Intra-Asia is a bright spot,” Stephen Ng, director of corporate planning, said in a Dec. 2 interview in Hong Kong. “It’s the biggest market for this industry and it’s growing faster than any other markets.” He didn’t elaborate on specific routes the company is considering.
Volumes on Asian and Australasian routes jumped 21 percent in the third quarter, outpacing growth for the U.S. and Europe and prompting Orient Overseas to consider adding more vessels. A.P. Moeller-Maersk A/S, the world’s largest container line, is also set to increase investments in China and India in anticipation of emerging market traffic growth outpacing demand on U.S. and European routes.
“Intra-Asia routes are particularly lucrative for shipping lines because they have short turnaround times, which helps cut fuel usage and costs,” said Johnson Leung, a shipping analyst at Tufton Oceanic Far East Ltd. in Hong Kong. “Orient Overseas is also managing costs well by using a larger share of its own capacity instead of chartering.”
Container volumes in emerging markets will grow 7 percent annually until 2015, more than triple the 2 percent expansion expected in more mature economies, according to Copenhagen-based Maersk.
Demand within Asia is helping drive a shipping industry rebound after rates tumbled last year because of overcapacity and slowing demand in the U.S. and Europe. Asia’s economy may grow 7.9 percent this year, the International Monetary Fund estimates.
Orient Overseas may charter some vessels to help meet demand, Ng said. The company is due to take delivery of two ships able to carry 8,000 boxes apiece next year, he said.
Global container shipping capacity may grow 9 percent next year, compared with a 10 percent increase in demand, Ng said.
“There may be a balance in demand and supply growth,” Ng said. “It’s more likely that we can maintain the momentum of this year.”
The shipping line is considering buying vessels that can carry as many as 13,000 20-foot boxes, Ng said. It hasn’t started negotiations on these orders, he said. The shipping line operates 85 vessels, with a total capacity of 384,889 twenty- foot containers.
Orient Overseas’s cargo volumes on Intra-Asia and Australasia routes jumped 19 percent in the first nine months, making it the company’s fastest growing market. It accounted for about 50 percent of total volumes.
Revenue on the sector jumped 47 percent to $835.8 million, or about 30 percent of total sales. The transpacific was the largest market in terms of revenue, while Asia-Europe had the biggest increase, with sales more than doubling.
The shipping line’s third-quarter sales rose 66 percent to $1.57 billion. Revenue in the first nine months climbed 48 percent to $4.1 billion, while volumes rose 13 percent to 3.1 million boxes.
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