Update | Orient Overseas said H1 net profit up 32 per cent to US$238.6 million

Orient Overseas (International) Limited yesterday reported its first-half net profit jumped nearly a third as cheaper fuel costs helped it tide over a slump in freight rates.

Net profit of OOIL, the holding company of Orient Overseas Container Line, rose 32 per cent year on year to US$238.6 million even though revenue declined 6 per cent to US$3 billion as overcapacity and weak demand continued to plague the container shipping industry.

“The volatility of freight rates indicates how competitive the industry is. The theme of the industry this year is carriers’ efforts in cost-efficiency and yield management amid a weak market,” said acting chief financial officer Alan Tung Lieh-sing.

OOCL saw total cost per standard container drop 9 per cent in the first six months of the year, achieved mainly through a 38 per cent reduction in bunker costs. The  savings also boosted the company’s bottom line despite lower vessel utilisation and revenue.

The closely watched Asia-Europe freight index dropped to %a seven-year low to below US$300 per  20-foot equivalent unit in the second quarter, a level that can barely cover fuel costs, let alone other operating and capital costs.

The free fall in freight rates was the consequence of a race among shipping lines to order larger ships over the past two years, coupled with a deteriorating economy in the euro zone.

Collapsing rates prompted many carriers to take unusual action such as temporarily withdrawing services from the market just before  the traditional third-quarter peak season,