Container shipping lines have idled about 5 percent of global fleet capacity, or 800,000 20-foot equivalent units, as demand for container shipping space slows, Maersk Line CEO Soren Skou said Thursday.
That figure could soon increase to more than 1 million TEUs, a level not seen since 2009, when trade was severely hit by the financial crisis, Skou said in Singapore on his first overseas trip as CEO.
He forecast container demand growth will slow to between 5 and 8 percent in the next few years compared to an average of 10 to 11 percent over the past 25 years as Western economies weaken, manufacturing activity in Asia slows, and products become smaller in size.
"Demand growth will be less than what it was in the past," Skou said in a report by Reuters. "We do not have any lay up ships at this point. But we are certainly not ruling out laying up ships over the summer if the market is growing less than what we expected."
Maersk has already removed 9.5 percent of its Asia-Europe capacity and has decided against ordering ten more Triple-E vessels, the world's largest container ships, to add to its current fleet of 20. Despite the cuts, Maersk Line maintains its dominant 15.5 percent share of the container market.
Maersk has the flexibility to reduce its global capacity by a further 9 percent as the contracts for 20 percent of its chartered vessels are due to expire this year, Skou said.
The container shipping industry, which lost an estimated $5.2 billion last year, according to Drewry Shipping Consultants, is starting to lay ships up in an effort to support the increase in freight rates it has been announcing on the major east-west trade lanes since the beginning of the year.
The overcapacity of containerships and weak demand have led container lines to slash rates in an effort to fill those ships and gain more market share, but this has led to substantial losses.
Last year, overall freight rates were 8 percent lower than 2010 while bunker prices rose some 35 percent, Maersk said.
The world's largest container firm, a unit of Danish shipping and oil group A.P. Moller-Maersk, last month reported a net loss of $504.59 million in 2011, and has forecast more losses in 2012.
Skou, who became CEO two months ago, reiterated the firm's main mission was to restore profitability and reduce market overcapacity by adjusting its fleet and reducing the speed of vessels.
"As an industry, we have been investing ahead of demand. As demand has been slowing down, we do expect to have a situation with excess capacity over the coming years," he said.
"We have to invest less. We have to stop trying to outgrow each other, building bigger and bigger ships."
Maersk Line forecast container demand to slow to between 5 and 8 percent in the next few years compared to an average of 10 to 11 percent over the past 25 years as Western economies weaken, manufacturing activity in Asia slows, and products become smaller in size.
Skou said the company does not have any acquisition plans and does not believe there will be much more consolidation in the industry in the near term