Container shipping industry in 'fragile' state

The global container shipping industry remains in a "very fragile" state due to weak demand and a glut of ships, the world's largest shipping company said yesterday.

Maersk Line, the container arm of Danish shipping giant A.P. Moeller-Maersk, said companies should go slow in bringing back to service hundreds of ships idled during the recession, otherwise the sector will extend losses which totalled $15 billion in 2009.

"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 per cent of the world's container shipping fleet, or about 500 vessels, had to be parked.

In terms of volume, about 80 per cent of world trade is carried by sea.

Mr 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 US imports rose 13 per cent year-on-year in the fourth quarter of 2009, but retail sales in the same period expanded by only one per cent.

For Europe, the continent's imports were up three per cent, but retail sales climbed a mere one per cent.

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

Mr 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 US and European demand, other speakers at the conference said.

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