Maersk Line, the world’s largest liner company, sees an uphill climb for the industry this year.
Maersk Malaysia Sdn Bhd managing director Omar Shamsie told StarBiz that container shipping had seen significant value destruction last year and it must be prepared for an uphill climb this year.
“Last year, many shipping companies had postponed existing orders for new vessels, idled existing vessels and increased their scrapping programmes,” he said.
“All these in an effort to take the cost out and better match capacity to the prevailing demand where these combined actions had resulted in a larger-than-expected impact on vessel fleet growth and helped create tighter capacity.
“We expect this situation to continue in 2010 and this in turn will help increase rates further. But, although freight rates have increased in the last four to five months, they are still at a historic low level, and it will be a while before they reach a stage of sustainable returns,” Omar said.
Global markets are showing signs of recovery, but the outlook for the shipping market is still uncertain, according to Omar.
“We believe there is a positive momentum for growth due to a pick up in demand and efforts to curb capacity increases, but it will be a modest growth rate compared to an industry yearly average of 10% in the last 30 years.
“It will be a while more before traditional consumer markets like the US and Europe return to their former strength, and this will contribute to the modest growth rates we expect in the near future in container volumes,” he said.
The shipping industry went through what had been described as its worst period in the post containerised era with the highest number of ships laid idle at the height of the global economic downturn last year.
In November 2008, freight rates in the Asia-Europe trade were slashed by more than 50% compared with the previous year and major shipping companies took evasive measures by cutting down on capacity and consolidating services.
In the same month that year, Singapore-based Neptune Orient Lines (NOL) disclosed that its shipping unit, APL, would reduce its capacity in the Asia-Europe trade by about 25% and by around 20% for its trans-Pacific trade.
Maersk Line had then also cut back on its Asia-Northern Europe network, resulting in a temporary removal of its AE8 service in November 2008.
And in the middle of last year, MISC Bhd announced its withdrawal from Grand Alliance, the world’s largest container shipping alliance effective Jan 1 this year.
Drewry Shipping Consultants Ltd believes that the industry has seen the worst of the global recession, but has forecast a very cautious recovery this year with the global container traffic expected to increase by 3.4%.
It said that rising container freight rates on many routes should not fool the industry into thinking that there was a full-scale recovery going on.
“This year will continue to be a very challenging one for all major stakeholders, even if we appear to have seen off the worst of this awful trade trough,” Drewry said.
Drewry Container Forecaster editor Neil Dekker said several large container operators would have “gone to the wall” in 2009 if major benefactors or governments had not stepped in to bail them out.
“There is a strong argument for thinking that if a major carrier had been allowed to fail, the market would have had a much better opportunity to correct itself and lay the foundations for a more profitable industry in the long term.
“A fairly large chunk of capacity would have been taken out of the market, allowing load factors and freight rates to improve,” he said in statement.
Dekker said even if the industry could secure the same amount of fresh cash in 2010 as it received from shareholders last year, it would not be sufficient to cover its needs.
“Another estimated US$1.4bil of cash may need to be found from other sources to keep the carriers trading. This may then prove to be the catalyst that leads operators to start selling assets – such as their terminals,” he said.
source: the star