Maersk Exec Says Container Shipping ‘Fragile'

The global container shipping industry should go slow in bringing back to service hundreds of ships idled during the recession, otherwise the sector will extend losses which are estimated at $15 billion in 2009, a Maersk Line executive warned on Wednesday.

"The situation remains very, very fragile for the shipping industry," said Hennie van Schoor, Maersk Line's director of business performance, Asia-Pacific.

“It is balanced on a knife's edge," he said in a keynote speech at the Asia Pacific Maritime 2010 conference in Singapore.

As global trade slowed down during the global economic crisis last year, freight rates plunged and 11 percent of the world's container shipping fleet, or about 500 vessels, had to be parked. Some are already being returned to service.

Van Schoor said there are signs of a pickup in global trade, with the United States and Europe importing more from the rest of the world.

But indications show this is being driven by companies stocking up on inventories rather than a surge in general demand.

He cited data showing that U.S. imports rose 13 percent year-on-year in the fourth quarter of 2009, but retail sales in the same period expanded by only 1 percent.

For Europe, the continent's imports were up 3 percent, but retail sales climbed a mere 1 percent.

"What this is telling us is that the underlying demand for growth is not there yet," he said.

Van Schoor also cautioned against the idled ships going back into the market, saying it will further upset the imbalance between a glut in capacity and weak demand.

While intra-Asian trade is growing because of the increasing network of free trade agreements in the region, it was still not enough to take up the slack in U.S. and European demand, other speakers at the conference said.

Divay Goel, head of Asia operations at Drewry Maritime Services (Asia), noted that unlike the consumption-led economy of the United States, Asia's economic growth is powered largely by production.

"Growth is there in inter-Asia (trade), but in terms of absolute numbers it would take some time before the Asian demand for consumer goods will catch up," he said.

Contact Peter T. Leach at pleach@joc.com.