Peak season fails to be the lifesaver of capsizing NOL

Freight rates sank to unexplored depths.

Its absent logistics segment proved to be the iceberg in Nepture Orient Lines’ side, as it posts lower than expected losses of US$96m in 3Q, and in its peak season, no less.

According to analysts from DBS, the peak season unfortunately did not translate to peak rates, as the SCFI spot rate index in 3Q15 was down 38% y-o-y and 3% q-o-q due to overcapacity.

“Hence, NOL’s average freight rate in 3Q15 was down 20% y-o-y and 8% q-o-q to US$2,093 per FEU, and more than offset the continuing improvement in operating costs per FEU,” DBS said.

Meanwhile, DBS said the market share wars continue to affect struggling NOL.

“As the race for 18,000 TEU ships heats up, new orders have crossed the 1.8m TEU mark in 2015 already, far ahead of the 1.0m TEU new orders seen in 2014. The delivery pipeline now stretches well into 2018 and average fleet growth over 2015-17 period is estimated at around 6.5% per year, while container trade demand will grow at best around 4-5% p.a.,” DBS said.

“Thus, the oversupply situation looks set to continue into 2017, and despite idle fleet creeping up to almost 4% of total fleet currently, we do not think liners are thinking beyond market share currently,” they added.

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