A "slow and steady recovery from the tough market conditions that characterised 2016" helped bring Orient Overseas (International), the parent group of Hong Kong-based Orient Overseas Container Line (OOCL) back to a $53.6m profit from a $56.7m net loss in the previous corresponding period.
This was reflected in the improving results, OOCL said in a stock market announcement, as the top line rose to $2.9bn from $2.6bn previously.
Elaborating further on operating conditions, OOCL finally seemed to turn mildly optimistic, commenting that "it seems that healthier demand growth has reappeared, at least to some extent".
It added: "Improving data, and moreover improving sentiment, in many of the large economies gives us some comfort as to the sustainability of this better environment."
However, OOCL cautioned that "while we must wait to see how enduring this will be, this is a very welcome change from recent years".All key indicators were positive in the first half of the year. Liftings rose 7%, load factor by 1% and most importantly revenue per teu by 8%, no small feat, given the huge increase in capacity OOCL has put on in the period.
This was especially evident in transpacific, where liftings rose 23% even though revenue per teu fell by 2%. This was due to additions to its own capacity as well as the increased scale of the Ocean Alliance which OOCL joined.
In the battered Asia-Europe trade, OOCL saw liftings and revenue recover from the historic lows of the year before. Liftings rose 22% and revenue per teu was up 21%, although this was from a low base in the previous corresponding quarter.
While noting that a "steady improvement in the supply demand balance is not a sign of a booming market", OOCL said it signifies a turning point as for the for the first time since the Global Financial Crisis, the imbalance is not worsening year-on-year.
"This is a significant shift, and if it holds, then the industry will at least have the chance to start to absorb some of the excess capacity that exists," it said. In line with this, OOCL also noted that it was benefitting from customers being more particular about financial robustness, especially on the transpacific and Asia-Europe trades.
Worryingly, the intra-Asia segment continued to show signs of weakness, OOCL said. Citing industry data, it noted that the trade seems to be showing "markedly negative volume growth" with trade between North China, Japan and Korea suffering in particular, although Taiwan and certain parts of Southeast Asia are doing better. OOCL said however that its business in this segment includes Australasia and a wider spectrum than covered under IADA, and as such its revenue per teu for the segment rose 8% even though volumes were down 5%.
OOCL also highlighted the return to higher cost operating conditions, with the average cost of bunker at $306 per ton in the first half of 2017 almost double the $186 per ton seen in the previous corresponding period.On the future, the group alluded to broader market conditions as a rationale for its acquisition by the China Cosco Shipping Group earlier this year. "For years, we have achieved scale benefits by means of alliance membership and the deployment of the right, often the largest vessels, in the each trade lane," it said.
"However, as the industry consolidates at speed, with the largest players now having millions of teu in carrying capacity, the capital base necessary to operate successfully, and to establish a place among the leading industry participants, is becoming increasingly sizeable," OOCL concluded.
Touting the benefits of the deal, it said: "The offer provides an opportunity for OOIL to continue to operate the OOCL brand, but as part of the China Cosco Shipping Group, and to bring together our operating model and our corporate culture with the competitive advantages of Cosco, including its size and scale, capital base, growing fleet and extensive port investments, to name but a few."