Asian shipping lines suffer heavy blow

Two of Asia’s biggest shipping companies completed a grim week for the crisis-hit container shipping industry on Friday.

Both reported steep losses and one warned that the outlook for next year remained “challenging”.
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Hong Kong’s Orient Overseas International, parent of the OOCL shipping line, announced a $232m net loss for the first half, while Korea’s Hanjin Shipping incurred a $516m net loss.

The container divisions of both suffered the same combination of falling container volumes and a drop in prices per container shipped that Singapore’s Neptune Orient Lines announced in its first-half results on Thursday.

OOCL’s container traffic fell 17.2 per cent compared with the first half of 2008, while revenue fell 37.2 per cent to $2.05bn. OOCL reported an operating loss for the half of $197m, against a $216m profit in the first half of 2008. Hanjin’s container division saw volumes down 20 per cent against last year’s first half, while revenues slumped 38.6 per cent to $2bn. The division produced $342m operating losses against a $59m profit for last year’s first half.

OOIL’s group figures were further depressed by a $5.11m operating loss in the property division and a $15m writedown in the value of its Wall Street Plaza office development in New York. Hanjin made a $57m operating loss in its dry bulk division – which carries iron ore, coal and other bulk commodities – on revenue down 45 per cent to $566m.

Hanjin told Bloomberg it expected the recovery to take some time. C.C. Tung, OOIL’s chairman, said the outlook for 2009 and 2010 remained “challenging”.

“While there are signs that the worst of the downturn may be behind us, a rebound in the global economy is expected to be subdued,” he added.

Container shipping lines have been hit by big falls in demand for the consumer goods that are their main cargo allied to a growing overcapacity problem as ships delivered during the sector’s record boom earlier this decade are delivered.

This week, Israel’s Zim announced restructuring plans to ward off insolvency and said it expected to burn through $1bn cash by 2013. Last week, Germany’s Hapag-Lloyd was forced to sell a stake in a key container terminal to its shareholders to avoid collapse.

Under Mr Tung, chairman and son of the company’s founder, OOCL has gained a particularly strong reputation for excellent management of information technology, a problem area for many container carriers.

The group-level loss compared with $158m in net profit for the same period in 2008. Group revenue fell 35.5 per cent to $2.07bn. “The deterioration in the performance of the container transport and logistics operations was a result of dramatically reduced revenue as business volumes suffered across all trade lines,” Mr Tung said.

Hanjin’s loss compared with $254m profits for the first half, with revenue down 40 per cent to $2.56bn.

OOIL’s net debt increased from $295m at the end of 2008 to $724m, and it cancelled its interim dividend. Hanjin recently shored up its balance sheet by selling some ships to a Korean government agency set up to help shipping lines.

Hanjin operates the world’s 10th-largest container ship fleet, according to AXS-Alphaliner, while OOCL has the 12th largest.