Robbert van Trooijen, chief executive, Asia Pacific region, Maersk Line, told delegates at an industry conference that shipping lines need to get accustomed to low freight rates and learn how to operate with lower costs.
“We have seen declining rates of 2% consistently over the last 10-15 years, triggering the need of economy of scale so Maersk Line has been investing in larger ships to bring down unit cost,” van Trooijen said at the TOC Asia conference held in Singapore on Wednesday.
He added that the GDP multiplier effect for container shipping has fallen from a multiplier of three in earlier times before dropping to two during 2008-2011 and further decreasing to just one since 2012. “So if global GDP grows by 3-4%, container trades will grow less than 3-4%. A double-digit growth in container trades is not going to happen,” he said.
Abdulla Bin Damithan, commercial director, DP World UAE region, noted that global container demand has grown by only 1% against the vessel supply growth of 8.5% last year, pointing to the overhang of tonnage.
“In 2015, newbuilding tonnage of 1.7m dwt were delivered, which was a record delivery. In 2016, over 1.35m dwt of tonnage are expected to be added. Shipping lines are facing blank sailings and idling vessels,” Damithan said.
In the face of growing challenges, carriers are entering into alliances and forging new partnerships, and industry consolidation is very much on the table. The trend of consolidation has seen CMA CGM in the process of acquiring Neptune Orient Lines (NOL), and the merger of China’s two state giant shipping conglomerates, China Cosco Group and China Shipping Group.
Maersk Line’s van Trooijen said the looming oversupply has led to low utilisation of ship capacity. Today, even at 95% vessel capacity utilisation, carriers can hardly make money. “99% utilisation is sometimes not even enough, and with approximately 20% downfall ratio, every carrier has to overbook by 20% just so that the ship can sail with full capacity,” he explained.
Damithan said: "2015 has been challenging for container shipping and the outlook for 2016 remains uncertain."
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