On August 22, OOCL (International) Limited (" OOCL International ", 00316.HK) announced its results for the first half of 2024.

From January to June, OOCL International achieved revenue of $4.646 billion, an increase of 2.31%. Net profit attributable to shareholders of the Company was $833 million, a decrease of 26.18% over the same period last year. An interim dividend of approximately 50% of profit attributable to shareholders, equivalent to approximately $416 million, will be paid for 2024, with an interim dividend of $0.63 per common share.

OOCL International said that the sudden deterioration of the situation in the Red Sea at the end of 2023 broke the trend of the low level of the container shipping market, coupled with the traditional peak season factors, and quickly rebounded. After the Spring Festival in 2024, the off-season came, together with the continuous delivery of new ships, bringing the pressure of oversupply to the market, and once again turned downward. However, since then, under the dual role of supply chain tension and continuous strong demand, most routes have resumed their upward trend, and Shanghai's export container freight index has repeatedly hit its peak since 2023.

The recent supply chain tightness is primarily the result of the ongoing Red Sea crisis. Container ships circumnavigate the Cape of Good Hope, and the extension of the route has caused shipping companies to invest extra capacity to meet schedule requirements. Secondly, due to bad weather, cargo backlog at the port, delayed ships to the port or some of the transit port transfer surge, some ports have different degrees of congestion, transport capacity is blocked. These to a certain extent explain the rapid increase in new capacity, but still in short supply, that is, insufficient effective capacity. In addition, global trade patterns are being reshaped by geopolitics and supply chain risk management requirements, with the emergence of emerging markets such as India, Vietnam, and Latin America, further optimizing the layout of shipping networks, which in turn creates new challenges for supply chain management.

On the demand side, the US economy remains resilient and Europe is recovering. Unlike the first half of 2023, which was dominated by service-oriented consumption, in the first half of 2024, consumers' willingness to buy gradually increased, while importers continued to increase their import expectations. At the same time, retailers are worried about the risk of delivery delays caused by the supply chain, in order to ensure that the goods can catch up with the sales season in time, a change in the previous inventory management strategy of on-time replenishment, resulting in the shipping market in the second quarter has shown a peak season.

In the first half of 2024, OOCL shipping's overall cargo capacity increased by 2% and total revenue increased by 2% year-on-year. The average fuel price for OOCL shipping in the first half of 2024 was $589 per ton, compared to $609 per ton in the same period in 2023. Despite a slight 3% drop in fuel prices, overall fuel costs increased by 13% due to a 17% increase in fuel and diesel consumption in the first half of 2024 compared to the same period in 2023. The increase in fuel consumption is due to the Red Sea crisis that began in late 2023 and diverted the Asia-Europe route to the Cape of Good Hope.

In the first half of 2024, OOCL International received its 7th to 11th new vessels with a capacity of 24,188 TEU from Nantong COsco Shipping Kawasaki Marine Engineering Co., Ltd. and Dalian COSCO Shipping Kawasaki Marine Engineering Co., LTD. The two ships delivered by Nantong COSCO Shipping Kawasaki Marine Engineering Co., Ltd. were named OOCL Valencia and OOCL Sweden; The three ships delivered by Dalian COSCO Shipping Kawasaki Marine Engineering Co., Ltd. were named OOCL Abu Dhabi, OOCL Finland and OOCL Denmark. The last new ship in the same series will be delivered in the third quarter of 2024.

In the first half of 2024, OOCL Logistics' revenue and contribution increased steadily compared to the same period last year. The revenue of the international business unit has been steadily increasing due to the growing demand for international logistics services and the development of new markets. Although freight forwarding and domestic logistics have been facing fierce competition, the business units are still able to maintain stable revenue.

Looking ahead, although the current market is at a relatively high level, uncertainty is still the norm. Whether the demand situation can be maintained and the length of time will become one of the important factors affecting the long-term and short-term trend of the market, and the future economic trend and the change of trade mode will have different degrees of impact on the market. On the other hand, the pandemic and the Red Sea crisis have taught us that supply chains are more sensitive and vulnerable to geopolitical risks. With the continuous delivery of new vessels, capacity is always the focus of the market, and the situation in the Red Sea will continue to be an important guide to this factor. In addition, some regional influencing factors cannot be ignored, such as: the progress of labor negotiations on the East coast of the United States, and whether it will further develop into a factor affecting the entire supply chain.

At the same time, the number of idle, maintenance and scrap vessels remained at historic lows during the reporting period, and it will be interesting to see the impact of increasingly stringent environmental regulations on existing conventional fuel vessels, which may have a certain offset to excess capacity.

All of these are dynamically intertwined to influence the future trend of the container shipping market, which brings us not only challenges, but also opportunities.

OOCL said its ships are currently fully loaded on major long-haul routes and expect to remain so for the next few weeks. That's to be expected at this time of year. Recently, the freight rates of different routes have fallen, but compared with the same period in previous years, it is still in a higher position. But the volatility of the market reminds us to proceed with caution.

As part of COSCO Shipping Group, OOCL and COSCO Shipping Lines will continue to be the first tier in the container shipping industry. Promote the development of its own fleet and explore new business growth points in a prudent and wise way, and help the company to build a robust end-to-end supply chain with advanced intelligent technology and environmental protection technology, help the company and the industry to gradually achieve sustainable development goals, and build an important channel for world trade. We are ready for that.

As at 30 June 2024, the Group held cash and bank balances of US $6,685 million, while the debt to be repaid within one year was US $506 million. As at 30 June 2024, the Group maintained a net cash position with a net cash to equity ratio of 0.45 to 1. The Group regularly prepares and updates cash flow forecasts to monitor the positions required for asset acquisition, development projects and working capital to ensure a stable level of cash turnover while effectively investing excess funds.