The ship is shrinking: NOL’s fleet capacity to dip 5% after retirement of 34 vessels

Will this move curb the firm's losses?

Neptune Orient Lines’ fleet capacity is set to shrink by around 5% after the planned retirement of 34 chartered vessels is completed by FY15.

According to OCBC, this is part of NOL’s fleet renewal programme and will increase the operational efficiency of its liner segment.

The streamlining of NOL’s fleet will bring cost savings derived from lower bunker costs, network reconfiguration, and leveraging on its G6 alliance for top-line growth.

“We also believe supply growth will continue to exceed forecasted demand growth putting downward pressure on freight rates. However, we expect the effects of operational efficiency and capacity discipline to partly offset the effects of lower profitability from depressed freight rates in its liner segment. Hence, we reduce FY14F and FY15F losses by a slight 3.7% to US$268.7m and 2.4% to US$238.2m, respectively,” noted OCBC.