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Better times ahead with supply-demand gap closing: Maersk official

SHIPPING lines with stable finances will continue to benefit from the 'Hanjin effect' for a prolonged period as shippers seek 'safe harbour' companies to limit counter-party risk, according to Robbert van Trooijen, Maersk Line's Asia Pacific CEO.

Better times ahead with supply-demand gap closing: Maersk official

SHIPPING lines with stable finances will continue to benefit from the 'Hanjin effect' for a prolonged period as shippers seek 'safe harbour' companies to limit counter-party risk, according to Robbert van Trooijen, Maersk Line's Asia Pacific CEO.

Better times ahead with supply-demand gap closing: Maersk official
30 November 2016 - 20:13

Better times ahead with supply-demand gap closing: Maersk official
SHIPPING lines with stable finances will continue to benefit from the 'Hanjin effect' for a prolonged period as shippers seek 'safe harbour' companies to limit counter-party risk, according to Robbert van Trooijen, Maersk Line's Asia Pacific CEO.
In a wide-ranging interview with Lloyd's Loading List, he also said most liner trades were now becoming more balanced, improving the outlook for the shipping industry, and that recent spot rate gains would help in forthcoming annual contract negotiations with shippers.
Speaking after Maersk reported an 11 per cent year-on-year increase in its third quarter traffic but still posted a loss of US$116 million, compared with a profit of US$264 million in the same period last year, Mr van Trooijen said the result illustrated Maersk's financial stability.
He noted that in Q3 Maersk managed to keep unit costs below US$2,000 per FEU despite increases in bunker costs, while total costs were down 3.5 per cent year-on-year and unit costs improved 14 per cent.
"We are a safe harbour - Maersk Group has liquidity reserves of US$11.8 billion and in Q3 we generated positive cash flow despite the loss, so we are financially stable," he added.
The financial stability of lines is, of course, an issue of growing concern to shippers following Hanjin Shipping's bankruptcy earlier this year which shook to its foundations the commonly held belief that global container lines were too big to be allowed to fail and would always be bailed out financially by governments, or would find another means of avoiding bankruptcy.
Post-Hanjin, shippers have started to more carefully assess risk in relation to liner finances, confirmed Mr van Trooijen. "We see there is a discussion ongoing between procurement and supply chain managers at our customers about this risk and how to safeguard the supply chain," he said.
The CEO said that Maersk and other carriers had received a volume boost post-Hanjin as customers sought alternative carriage, especially on Hanjin's key trade, the Transpacific. He argued that the recent alliance consolidation within liner shipping alongside M&A activity which has seen the number of global carriers fall to 13 from some 21 just six years ago would be a positive for customers by delivering additional stability.
Speaking before Maersk and MSC ruled out HMM joining the 2M container shipping alliance, he said that despite the recent surge in liner acquisitions and mergers, there was still room for more consolidation.
"A lot has been done already, but there is still scope for more," he said. "There are still quite a few players that are still single digit in terms of market share, so on paper there is more room for consolidation, but I wouldn't want to speculate. For any deal, if it comes, it has to be the right time for the players involved.
"But certainly, we've seen an acceleration in consolidation in the last two years. If that's a trend I don't now, but it could be, and it would be a positive trend.
"Maersk still has an orderbook of 12 per cent of total capacity, but that's smaller than most of the competition. And recycling continues. Ships entering our business next year will take over from smaller ships. We expect better demand growth to help the supply-demand balance in 2017, which will contribute to a more healthy picture for the industry.
"On 2017 I would say that based on the alliance schedules published so far we see balanced growth to Europe of around 2.0-2.5 per cent both for supply and demand growth and on the Pacific trade we see more demand than supply growth based on the alliances announcements."
Mr Van Trooijen said some trades to and from Asia were now showing signs of improved performance, including westbound lanes from China to Europe where 'trade is growing steadily", and Russia which is "rebounding from its worst times".
Van Trooijen was positive about the final quarter of 2016 and the outlook for 2017, both in Asia and beyond, but said improving financial performance would remain the core aim of Maersk Line next year.
"Growth in 2016 has been quite good, and I'd expect moderate growth in 2017. But more important for the industry overall is not volume growth, but bottom line profitability. We need a sustainable business and returns for shareholders, so that's the priority."

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