European container-shipping operators such as A.P. Moeller-Maersk may benefit little from higher volumes next year as carrier lines battle to remain profitable amid overcapacity and weak demand.Global lines will ship the equivalent of 168 million 20-foot containers, an increase of 6.6 per cent from 2012, according to London-based shipping-services company Clarkson.
Traffic on mainline Asia-Europe routes will lag global growth, rising four per cent to 21 million 20-foot boxes as low European consumer demand limits orders.Economic weakness caused by the debt crisis in Europe, which accounts for more than a third of global trade, is putting pressure on earnings at shipping lines such as Copenhagen-based Maersk Line, the world's largest, and CMA CGM SA. Further clouding the outlook, industry capacity will grow 7.5 per cent next year, Clarkson says, undermining efforts to boost profit on Asia-Europe routes as earlier rate rises struggle to take hold.
"Unless Europe has an unexpected recovery, growth volumes from Asia to Europe are likely to be low," said Lars Jensen, chief executive officer of Copenhagen-based SeaIntel Maritime Analysis. "Consequently we expect the structural overcapacity to persist in 2013, leading to rapid cycles of price increases and price declines as carriers intermittently idle and re- activate tonnage.
"World freight traffic growth probably slowed to 4.8 per cent this year from 7.1 per cent in 2011, according to Clarkson. East Asia-Europe volumes will decline 3.3 per cent as European consumers struggle with fiscal austerity and economic uncertainty caused by the sovereign debt crisis.The economy of the 17-nation euro area shrank 0.1 per cent in the third quarter as the region slipped into recession for the second time in four years. A gauge of services and manufacturing output in the euro area was at 47.3 in December, staying below the 50 mark that indicates contraction for an 11th month, London-based Markit Economics said on December 14.
The European Central Bank forecasts the economy will shrink 0.5 per cent this year and 0.3 per cent in 2013.
The weakness of Europe's economy and its debt turmoil is also affecting the rest of the world, curbing global trade growth to 2.5 per cent this year from five per cent in 2011, according to the World Trade Organization's September forecast.
Global merchandise trade volume rose 2.7 per cent in the first three quarters of 2012 from a year earlier, according to the Geneva-based WTO. By comparison, European Union exports were unchanged and imports posted a 2.7 per cent drop during the same period.
Next year, global trade will expand 4.5 per cent, the WTO forecast in September. World container growth in 2013 will be driven by trade on secondary routes, such as between northern and southern hemispheres and within Asia, as well as by Middle East and Indian volumes, according to Clarkson."Shorter trade routes, more suited for smaller vessels, will become increasingly important as the growth of emerging- market demand for goods continues to outpace developed markets," said Brandon Oglenski, an analyst at Barclays Plc in New York.
"We believe supply fundamentals may improve over the next 12-18 months as container scrapping has picked up and the delivery schedule is set to run off to more manageable levels."Maersk estimates "single-digit growth" in global container volumes in 2013, which "includes the possibility for marginal positive growth in Europe," spokesman Hursh Joshi said in an e-mail response to questions.
"Maersk is absolutely committed to maintaining capacity discipline" and "Maersk Line does not plan to offer any new capacity" on routes between Asia and Europe in 2013, Joshi said.Rates to ship a full 40-foot box from Shanghai, China's busiest port, to Rotterdam, Europe's biggest, have dropped 50 per cent from a peak reached in May, according to Drewry Shipping Consultants's World Container Index.Carriers will take delivery of ships capable of holding 1.4 million 20-foot boxes, or TEUs, increasing the total global supply to 17.7 million, according to Clarkson.
The imbalance in demand and supply has damped Maersk's shares, which have climbed 10 per cent this year compared with a 14.5 per cent gain in the Stoxx Europe 600 Index.Maersk will next year start receiving the first of 20 new 18,000-container vessels built by Daewoo Shipbuilding & Marine Engineering Co.
The ships will be the largest cargo-box carriers afloat. Shipping lines are deploying bigger vessels to boost fuel efficiency and to cut operating costs. The biggest ships are mainly used on Asia-Europe routes as US ports generally can't handle them.
"Aggressive 2013 global vessel delivery plans should drive rate weakness at Maersk Line, curtailing recovery," said Neil Glynn, an analyst at Credit Suisse Group in London.