OVERCAPACITY in the shipping industry will remain for the next five
years, according to a senior executive of Maersk Line, who stressed the
need to remove capacity to create demand.
"We will without doubt in five years time from now have an industry with plentiful capacity," Maersk Line CEO Soren Skou told the Reuters Nordic Investment Summit recently. "We cannot create demand by lower prices.
It is more important to remove capacity," he said.
When the economic crisis hit in 2008, global trade and shipping
companies' orders for new vessels were as much as 50 per cent of the
existing fleet. The overcapacity has driven spot rates on the main
routes between Asia and Northern Europe to loss-making levels, according to Reuters.
Maersk Line cut its fleet container capacity by about 1 per cent between the second quarter of 2012 and the same period this year, but it has
not announced any plans to cut further.
Shipping analyst Jacob Pedersen from Sydbank described the current
market as brutal. "If competitors follow Maersk Line's strategy and
adjust capacity it will benefit the entire industry via significantly
better freight rates," he said.
Only two of the 12 big container shipping lines, Maersk Line and
France's CMA CGM, reported an operating profit in the first six months
of 2013. Before the crisis, Maersk Line and other container shipping
companies had growth in demand for seaborne containers of more than 10
per cent a year. But those days will not return, Mr Skou said.
"Growth in the container industry in the future is more related to
global economic growth," he said. He said he expected global demand for
seaborne containers to increase 2-3 per cent in 2013.
Parent AP Moller-Maersk Group lowered a near-term profitability target
(return on invested capital) for Maersk Line to 8.5 per cent per year
from 10 per cent last week. The long-term profitability target for the
container business was held at 10 per cent.
To cope with the tough market conditions, Maersk Line managed to reduce
total costs per container by 12.7 per cent in the second quarter from a
year earlier. The decrease was mainly driven by lower fuel costs and
logistical route efficiencies.
In addition, the company has ordered 20 Triple-E class mega vessels with a capacity of 18,270 TEU each. The vessels use 50 per cent less fuel
per container than the average container ships deployed on routes
between Asia and Europe. "And they are 20 per cent more fuel efficient
than Emma-class ships that are the biggest and most efficient at the
moment," said Mr Skou.
WORLD SHIPPING
06 October 2013 - 19:37
Maersk Line sees shipping overcapacity lingering for five more years
OVERCAPACITY in the shipping industry will remain for the next five years, according to a senior executive of Maersk Line, who stressed the need to remove capacity to create demand.
WORLD SHIPPING
06 October 2013 - 19:37
Maersk Line sees shipping overcapacity lingering for five more years
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