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  1st December 2008 - STAR MARITIME

Uncertain outlook for container shipping

THE container shipping business is expected to grow below 6% next year due to the US recession and the contraction in the European market.

Maersk Line Malaysia country manager Omar Shamsie said the liner business should see a growth rate of between 5% and 6% this year.

“The outlook for container shipping and world trade is very uncertain due to the developments in both the world economy and the financial markets,” he told StarBiz.

“Consumers in the US and Europe are now holding back and we can expect to see the decrease in demand continue for quite some time,” he said.

Container shipping has seen significant growth over the last 30 years, with the yearly growth rate being 10% on average.

Omar said that even during the worst downturn in 2001, the growth rate was 4%, while in the best years, the shipping industry had enjoyed a double-digit rate.

“The coming months will be tough but Maersk Line is prepared and will try first and foremost to hold on to our current business,” he said.

Omar said container liners had already been taking steps to counteract the negative effects of the downturn, with many shipping companies, including Maersk Line, reducing capacity on the Asia-Europe routes.

“The recent Far East Freight Conference figures have shown Asia-to-Europe trade shrinking by 2.7% during the third quarter.

“Many companies are also talking about vessels’ lay-ups. While Maersk Line has not laid up any vessels, it is not improbable that we will have to lay up a number of container vessels to further reduce our capacity,” he said.

However, he added that Maersk Line, which was part of the strong A.P. Moller–Maersk Group, should remain strong as its employees and organisations were tuned in to handle changes.

“Our streamlining initiatives will make our company more robust as we work closely with our customers,” he said.

On the prevailing trend in the industry in the current market condition, Omar said that as the container shipping industry remained very fragmented with many small and few large carriers bidding for the same business, consolidation would be inevitable.

Maersk Line, Omar said, it was also continuously optimising its routes in light of the market developments.

“We will do this via changing routes and consolidating them as well as economical sailing, calling other ports and – not least – by looking at costs everywhere.

“Reducing capacity will no doubt help the situation but with the current US recession expected to be longer and deeper, shipping lines will likely remain affected, especially the smaller players,” he said.

On the temporary removal of its AE8 service from its Asia-Northern Europe network due to the drop in demand last month, Omar said it would not affect Malaysian ports.

“This is because the AE8 service port calls have been included in our other services on the Asia-Europe routes.

“The changes to this service mean that we can continue to serve our corridor combinations and plan for investment when the trade picks up.

“Also, our customers will benefit from more direct calls from Asia to the Mediterranean with improved transit times,” he said.

The temporary removal has resulted in the reduction of 7,600 20-ft equivalent units from its weekly network capacity.


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