NOL sailing in rough waters

ARPF fell 8.5% to US$2,799 as customers hold back on shipments due to economic uncertainty.

The shipping company reported a mixed set of numbers for four weeks beginning 27 Aug 2011 to 23 Sep 2011.

While volumes increased 5.4% YoY to 229,300 forty-foot equivalent unit (FEU) but average revenue per FEU (ARPF) fell to US$2,501/FEU, which represents a 19.4% YoY or a 2.3% MoM drop.

In a statement, OCBC noted that companies are bucking from placing their orders this early for the holiday season due to present economic jitters and little concern of finding shipping capacity.

According to the research agency, although the trend could result in last-minute orders later this year, “NOL management acknowledged that container shipping may lose out to air freight if orders come in too late.”

In another sign of the market's tentativeness, the Transpacific Stabilisation Agreement (TSA), a group of 15 container shipping lines, have delayed announcing targets for next year's rates on Asia-U.S. trade lanes. The setback has been blamed on the inconsistent economic indicators and customers unwilling to commit to orders.

According to The Baltic and International Maritime Council (BIMCO), container shipping capacity has increased 6.5% YTD, as 483,000 FEU of capacity were delivered. The latest deliveries have resulted in total container shipping capacity of more than 7.5m FEU. Meanwhile, scrapping of vessels has only seen 15,258 FEU taken off the supply line, especially since the global fleet is rather young.

The increase in container shipping capacity this year has depressed freight rates. For the whole of 2011, container shipping capacity is expected to outpace demand growth by a mere 2ppt.

OCBC said shipping lines around the world will have to lay up vessels in the near future so as to limit container shipping capacity since shipping demand has failed to take off.

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