Maersk navigates into rougher seas

World's biggest box container line forecasts tougher times on southern China-Europe trades this year

PUBLISHED : Friday, 17 August, 2012, 12:00am
UPDATED : Friday, 17 August, 2012, 2:36am

Maersk Line, the world's largest container line, is set to see a fall in box volumes from southern China to Europe and the Mediterranean this year as the European debt crisis and economic uncertainty hit exports from the Pearl River Delta.

David Skov, head of Maersk Line in south China, expected "slightly negative growth" in south China-Europe trades.

He declined to estimate the fall in volumes, but said Maersk's forecast was "in line" with a 1.7 per cent drop predicted by maritime consultancy Drewry for container volumes from south China. He said container volumes to the Mediterranean had been particular hard hit because of the economic crisis in Spain and Italy.

But Skov pointed out there would "still be growth overall … although not a lot" on Maersk's services from China to Europe because of an increase in volumes from central and northern Chinese ports.

"The trend of south China is that it's not growing as much as other parts of China. There is still high growth out of east China," he said.

"We believe global container growth will be 4 per cent with declining inbound European volumes. We are still experiencing volume growth in China well above the global average."

Figures from Hong Kong's Port Development Council show container volumes dropped 0.7 per cent to 11.77 million teu (20-foot equivalent units) in the first six months of this year. This included a 6.8 per cent decrease to 1.9 million teu in box volumes in June.

China Merchants Holdings (International), which has extensive container terminal interests in China, saw a 2.6 per cent increase to 6.74 million teu in box volumes at its western Shenzhen ports between January and July. By comparison, container volumes at its Ningbo terminal rose 7.5 per cent in the first seven months of this year, with a 7.1 per cent increase in Qingdao.

Skov said the decline in volumes from southern China "was the continuation of a trend where some export products are migrating to other parts of China or, to a lesser extent, other Asian low-cost countries such as Vietnam, Indonesia and India". This shift especially covered labour-intensive products such as shoes.

Skov estimated that about 60 per cent of Maersk's cargo volumes on Asia-to-Europe routes was carried on spot contracts where it could impose rate increases and peak-season surcharges, while around half of transpacific volumes was carried on spot contracts.

"We've been getting the peak-season surcharges," he said, but at the same time he was "not overly optimistic" there would be a pre-Christmas spike in container volumes as global economic conditions weighed on consumer sentiment.

Despite the "relatively bleak" outlook on Europe, Skov said there was still double-digit growth of about 12 per cent in container shipments on Maersk's container line trades to South America and Africa.

He said that while these regions had a "significant high growth rate" in box volume terms, these markets "were still relatively small" compared with the big Asia-Europe and transpacific trades.

Overall, Maersk Line had forecast 4 per cent growth in total container volumes this year, he said.

Skov said Maersk's "outlook for the rest of this year is of slowing growth and demand" while a recent resurgence in oil prices and its impact on fuel costs was also a concern.

He was commenting on Wednesday after the Maersk group announced a second-quarter net profit of US$1 billion.

This included a net profit at Maersk Line of US$227 million in the second quarter, compared with a net loss of US$95 million in the same period last year. Overall, Maersk Line saw an 11 per cent rise in container volumes to 2.2 million feu (40-foot equivalent units), while average freight rates climbed 4.2 per cent to US$3,014 per feu.

Skov said Maersk Line had "a way to go before it was back in the black" but the carrier had been able to increase rates and trim costs.