Why NOL could be showing signs of deterioration in Asia-Europe

Spot rates fell by 20%.

According to CIMB, Neptune Orient Lines (NOL) performed reasonably well despite 3Q13 Asia-Europe (AE) and
transpacific (TP) spot rates falling 20% yoy.

CIMB noted that NOL expanded its nominal teu ship capacity by 10% between end-2012 and end-3Q13, but volumes carried shrank 3% yoy for 9M13 (AE volumes shrank 12%, TP fell 1%). Headhaul slot utilisation fell 3% pts yoy for 9M13, with AE and TP down 5% pts each.

This suggests that NOL lost market share in the AE trade as its volumes fell by more than the reduction in its sailings, while it also lost market share in the TP trade despite increasing sailings. The global AE trade grew 1% yoy, while the TP trade grew 3.7% yoy for 8M13.

Here's more from CIMB:

NOL’s 3Q13 rates fell 8.8%, but the impact on the bottomline was blunted by 5% lower unit costs, with  cost savings of circa US$500m for the full year, on top of the US$500m already saved in 2012.

Hence, the 3Q13 core net loss of US$9m was much better than 3Q11’s US$84m loss, despite lower volumes and rates in 3Q13.

But against 3Q12’s core net profit of US$41m, last quarter’s performance does not look as good, though it should be kept in mind that 2012 was a year of “good” industry behaviour, which sadly descended into an all-out price war this year.