With Black Friday yesterday kicking off the pre-Christmas shopping season in the United States, container shipping lines hoped strong retail sales coupled with cuts in shipping capacity would buoy carriers against wintry economic conditions, an industry conference heard in Hong Kong yesterday.
Carriers, suffering from falling freight rates and overcapacity, were already forecast to make collective losses of US$3 billion this year, Peter Levesque, chief operating officer at Modern Terminals, told about 500 delegates to the Asian Logistics and Maritime conference.
Xu Zuyuan, deputy minister at the Ministry of Transport, said 'this year is going to be very cold' for the shipping industry, including container lines. 'Everyone in the shipping sector is facing a difficult time.'
Tung Chee-chen, chairman of Orient Overseas Container Line, said with the US and Europe together accounting for 50 per cent of global economic activity and Europe already in recession, it meant 'bad news' for trade next year. But he predicted buoyant consumer demand in the US before Christmas would lead retailers to replenish depleted inventories to sustain cargo volumes.
OOCL, the Tung-family controlled shipping firm, and its container shipping partners have merged or cut services on transpacific and European services in an effort to lift freight rates and cargo demand. OOCL and four other container lines have combined two services linking South Korea, China and the US east coast. The Grand Alliance, comprising OOCL, Germany's Hapag-Lloyd and Japan's Nippon Yusen Kaisha, also suspended one of its Asia-Europe services early this month, which had reduced OOCL's capacity on Asia-Europe services 20 per cent, Tung said.
Tim Smith, chief executive of the North Asia region for Maersk Line, said the carrier would try to increase freight rates next month on Asia- Europe services.
'We think in the run-up to Chinese New Year we can get rates up. Whether it's sustainable I don't know,' Smith said. This came as freight rates from Asia to Europe have fallen to about US$550 per teu (20-foot equivalent unit), prompting Beijing to look at whether these rates actually cover shipping lines costs.
On transpacific services, Smith said 'prospects were very good' that rate increases of at least US$400 per 40-foot container from January 1 could be levied.
Currently, about 180 ships totalling 439,000 teu, equivalent to 3 per cent of the world's container fleet, were temporarily anchored as carriers reduced capacity to better match vessel supply with cargo demand. Smith said he thought this would climb to 600,000 teu by January based on liner shipping industry estimates.
By comparison, more than 1.3 million teu of capacity was idled by shipping lines after the financial crisis hit in 2008 when trade collapsed.
Both Tung and Smith thought trading and operating conditions for container lines would continue to be challenging next year.
The proportion of shipping bosses, out of 1,000 polled at a maritime forum this month, who expected no recovery in the sector until 2014