OOIL cuts Europe route capacity by 20%

Monday, 28 November 2011 00:00 - - {{hitsCtrl.values.hits}}

HONG KONG (Reuters): Orient Overseas (International) Ltd (OOIL), a Hong Kong-based container ship operator, said it has cut its capacity on routes to Europe by 20 per cent and is not optimistic on industry outlook for next year.

“The shipping industry started losing money in the third quarter,” Chairman and Chief Executive Tung Chee Chen told reporters on the sidelines of a logistics and maritime conference here on Friday.

He said OOIL did not need to report third-quarter results and declined to comment on the company’s results in the last quarter.

“The outlook will eventually depend on Europe’s situation, and whether the debt crisis can be resolved,” Tung said. “But in consideration of today’s situation, next year will not be optimistic.”

He added that the Grand Alliance, members of which include Germany’s Hapag-Lloyd AG, Japan’s Nippon Yusen KK and OOIL shipping unit OOCL, had cut European capacity by one loop to three loops.

One loop had 10 ships and the cut represented about 20 per cent of OOIL’s European capacity, he said.

“Operating costs are high as fuel and fuel-related costs are rising and even higher than in 2009, although business is not as bad as in 2009,” Tung said.

Some analysts said they believed OOIL could outperform the container shipping market but were doubtful it could avoid losses in an industry downturn in 2012.

Global shipping, which has been seen as a good proxy for world trade, has been hampered by a huge supply of new ships ordered during an industry peak in 2007 and 2008.

Weak consumer demand in the United States and Europe has seen the manufacturing sector in China, the world’s factory, shrink the most in 32 months in November.

OOIL’s reported an 86 percent drop in first-half net profit to $175 million on high fuel costs and low freight rates amid a supply glut in the shipping industry.