Singapore: Maersk Line, a unit of the world’s top container shipper A.P. Moller-Maersk, said on Wednesday an economic recovery may lead to year-on-year volume growth in the fourth quarter for the industry.
The growth would be the first in a year for an industry that has suffered major losses as a plunge in world trade hit freight rates and volumes, and forced shipping firms to cut capacity and reduce headcount.
“We do see a recovery in shipping, but it is from an incredibly low level, so in my mind we have bottomed out,” Jesper Praestensgaard, Maersk Line’s CEO for Asia Pacific, told Reuters, referring to an image of the Titanic at the bottom of the ocean.
“We saw in the first few months of this year the market drop by close to 20% and we have seen an upturn since then but still a year-on-year decline. If we are lucky, we could see growth on a year-on-year basis in the fourth quarter,” he said in an interview.
Praestensgaard said the industry needs to consolidate to become more efficient, but firms lacked money to buy out rivals and it was quite likely that some shipping firms could go bust.
His remarks came as the parent company announced a plan to raise $1.8 billion through a share placement. A.P Moller Maersk’s CEO Nils S. Andersen said on Wednesday the company sees opportunities in oil production, rigs and supply ships, and terminals.
Maersk shares traded 7.6% lower by 0945 GMT.
Some analysts expect state-backed firms such as Singapore’s Neptune Orient Lines (NOL) and China’s Cosco Holdings to lead the way in the consolidation process.
Praestensgaard, speaking from an office overlooking the port, said that container freight rates have started to rise as well, but the company and industry in general are still losing cash from some routes.
Container shipping in Singapore, the world’s busiest port, has slowly improved this year but was still down nearly 19%in July from a year ago.
Drewry Shipping Consultants estimate global volumes to fall by 10.3% in 2009 before growing by 1% in 2010, while IHS Global Insight sees growth of 6.8% next year.
A.P. Moller Maersk swung into a bigger than expected first half loss in the first half of 3.02 billion Danish crowns ($577 million) as a result of the downturn, and has warned the second half could be as bad.
Praestensgaard said the shipping industry may lay up more ships next year, and an massive overhang of ordered vessels means a balance between supply and demand may take years to achieve. He said the industry would have to get used to lower growth rates.
“There’s this wonderful picture that I saw, the picture of the Titanic lying down at the bottom of the ocean and they come out with an announcement: we have good news ladies and gentlemen, we have bottomed out.”