Published August 18, 2009

NOL takes another hit for container shipping

4-week volume and revenue fall 11% and 29% respectively

By VINCENT WEE
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NEPTUNE Orient Lines' latest operating numbers show that the slump in the container sector is not yet over. For the four weeks from June 27 to July 24, NOL's container shipping volume and revenue fell 11 per cent and 29 per cent year-on-year respectively.

Not lifting as much: For the year-to-date, volumes have declined 22per cent to 1.16 million FEUs from 1.48 million FEUs in the corresponding period last year

The period saw its container shipping volumes fall to 187,400 forty-foot equivalent units (FEUs) from 209,800 FEUs in the previous corresponding period. Average revenue per FEU meanwhile slipped to US$2,219 from US$3,116.

The decrease in volume was due to the decline in demand on nearly all major trade lanes, NOL said. The line also blamed lower average revenue per FEU on lower core freight rates and lower bunker recovery.

The beleaguered container shipping industry has been struggling to try and raise freight rates amid plunging demand. The industry grouping Transpacific Stabilization Agreement, which groups together 14 of the largest container lines, last week said that it was planning to raise rates on the key Asia-US trade by US$500 per FEU from this week.

The recently concluded contracts on this trade, which are typically negotiated on an annual basis, were particularly tough this year as there are too many ships trying to move too few containers amid the deep slump in the US economy, the world's biggest consumer.

There have been reports of rampant undercutting by some of the bigger players, who can afford to take losses just to keep their ships busy, which has affected all the lines overall.

Poor US consumer confidence figures released last week have cast a pall over the trading outlook as they seem to suggest that the traditional peak season in the last two quarters of the year will not be as busy as previously expected as consumers continue to keep their wallets closed.

For the year-to-date, volumes have declined 22 per cent to 1.16 million FEUs from 1.48 million FEUs in the corresponding period last year. The slide in average revenue per FEU kept pace, declining 21 per cent to US$2,350 from US$2,992 previously.

Shipping lines have been suffering from a double whammy as the year progresses because bunker prices have slowly ticked upwards while weak demand has meant that they have had limited ability to pass on these added costs to their clients.