Container shipping needs “transformation” that goes beyond the changes carriers are undertaking to survive and likely will include consolidation, a Maersk executive told The Journal of Commerce’s East Coast Maritime conference.
“I deliberately used the word transformation as opposed to just change,” said Morten Nicolaisen, chief financial officer of Maersk Inc. “Change can be sometimes be a tweak or a small thing that you’re changing. Transformation is much more fundamental.”
Citing estimates that container ship lines will lose $20 billion this year, Nicolaisen said ship lines need to earn $10 billion to $20 billion in profit to sustain needed investments. That means the true gap between profitability and investment need is $30 billion to $40 billion, he said.
Nicolaisen questioned whether all carriers should have global ambitions. “Does it really make sense,” he said, “for everybody trying to become a global player with a small presence in all trade lanes with a very small market share?”
Ocean carriers, he said, must focus on their core operations. He said most inland container movements are “probably best left to domestic providers who can mix and match different modes of transportation and know their own markets.”
Two years ago, Maersk drastically revised its inland network by consolidating delivery points. In August the carrier introduced a chassis pool that that leases chassis for unrestricted use by truckers.
Paul Bingham, managing director of global trade and transportation at IHS Global Insight, told the ECM conference the global economy appears to be in a slow, uneven recovery, but that trade volumes won’t quickly recover to the levels of the boom years of the last decade.
Bingham said even state-controlled carriers may eventually find that their governments will eventually tire of bankrolling heavy losses. “It’s hard to imagine the industry getting out of this without some financial failures,” he said.
“There are too many ships and probably also too many companies that are too small.” Not every carrier can or should have global ambitions, he said.