Maersk Line to leverage on pick-up in freight rate

HONG KONG: A pick up in freight rates and world trade could help Maersk Line, the world’s biggest container shipping operator, achieve better results in 2013 despite excess capacity in the industry, its North Asia chief told Reuters.

Maersk Line, a unit of Danish group A.P. Moeller-Maersk and barometer of world trade as its fleet carries more than 15% of all seaborne containers, returned to profit in the third quarter thanks to a rebound in shipping container rates, after four consecutive quarters of losses.

“We hope to be able to build on this momentum and deliver overall returns which provide an acceptable return on the capital we invest,” Tim Smith said in a telephone interview.

“In this regard, we believe 2013 provides some potential to deliver a better result than 2012, although market conditions remain challenging.”

We don’t want to do anything to undermine the fragile supply and demand balance. — TIM SMITH

Maersk Line did not have any immediate plan to invest in new ships, preferring to grow with the market in terms of capacity.

“We don’t want to do anything to undermine the fragile supply and demand balance,” Smith said, adding he did not believe the industry needed new capacity for a couple of years.

International shipping firms have since 2011 been hit by a global economic slowdown and an oversupply of vessels.

BOCOM International forecasts 7.2% net growth in the global container fleet in 2013, outstripping a 4.5% rise in shipping demand.

Carriers have to resort to lay-up and slow steaming to reduce the effective capacity of the global fleet to support freight rates above breakeven levels.

A gradual recovery in the US economy was positive, although the weak European economy would likely remain a concern in 2013, said Geoffrey Cheng, an analyst at BOCOM.

Maersk Line cut Asia-Europe capacity further in the fourth quarter, bringing the total capacity reduction in 2012 on its Asia-Europe network to 21% before it brought back some of those sailings in December.

“We are moving up and down on a great roller-coaster the whole time,” Smith said.

Asia-Europe trade was likely to be quiet in the second part of the first quarter due to seasonal reasons and the company may have to take some ships out or idle them, he added.

About 5% of the global container fleet was idle at the end of last year, totalling 809,000 twenty-foot equivalent units (TEU) and the number may rise to one million TEU in February, according to industry consultant Alphaliner. — Reuters