OOCLÆS TUNG SEES POTENTIAL FOR PEAK-SEASON UNDERCAPACITY
C.C. Tung, chairman and chief executive officer of Orient Overseas (International) Ltd., said cargo volumes might exceed available ship capacity during this year’s peak season.
Like other major containership operators, OOCL — a subsidiary of Orient Overseas (International) Ltd. — has seen a return to balance between supply and demand in the container shipping trades, as strong volumes have used up surplus ship capacity.
Tung said in the annual report of OOIL, released Friday, that the return to a better equilibrium was such “that there now exists the potential for an excess of demand over supply during the critical peak season.”
Shippers and forwarders have recently experienced a shortage of space and delays in the transatlantic trade. They also suffered cargo rollovers and capacity crunches last summer in the Asia-to-North America and Asia-to-Europe trades.
Tung’s comments suggest there could be a repeat of last year’s peak season undercapacity.
“During the traditional peak season, rather than ships sailing the oceans half-full as the pessimists had been predicting, there was a marked shortage of space,” Tung said of last year’s market.
OOCL reported its overall vessel load factor increased 4 percent last year, as the carrier handled 13 percent more containers. However, average freight rates per TEU dropped 9 percent.
In the transpacific trade, OOCL’s 2002 load factor improved 6 percent, on a 16-percent rise in box volumes, but average revenue per TEU declined 8 percent. OOCL reported similar trends for 2002 for its Asia/Europe container services.
In the transpacific trade, most analysts believe ocean carriers are in a stronger bargaining position than last year as they negotiate new annual service contracts due to be effective from May 1.
Tung said last year’s contract rates for the industry were “set at unsustainably low levels.”
Looking at the medium term, Tung warned that uncertainties about demand growth and continued orders for new ships might affect the balance between supply and demand. “Any further increase in this rate of ordering (of ships) will have the potential to return us together with the rest of the industry to the situation in which freight rates are unsustainably low,” he added.