Maersk Warns of Over-Capacity Risk in 2013
Writer for CNBC.com
Over-capacity in the global container ship market will continue to provide a drain on profit growth in 2013, according to Danish shipping group Maersk Line's chief executive for North Asia Tim Smith.
On CNBC's Asia 'Squawk Box' on Monday, Smith warned capacity issues in the global container market would continue to put downward pressure on industry participants this year.
"This year there should be 10 to 11 percent more capacity coming in from the ship yards. As we expect 4 to 5 percent demand growth, we still need to bridge that gap. We need to carefully monitor supply and demand and take ships out if they are not needed," he added.
The cautious comments come even as the world's largest container shipper reported last month a profit of $461 million for 2012, on cost cuts and improving demand. Its parent company Maersk Group, which also operates oil and gas interests, reported a net profit of $4 billion for the full year, better than the $3.7 billion it forecast in November.
Smith said he was "positively surprised" by the firm's growth despite difficult market conditions relating to Europe's debt crisis, when shipping routes between Asia and Europe were hit hard.
"Last year was about getting supply and demand matched up. We saw a big reduction in demand so we focused on taking some ships out. On our Asia-Europe route we took 21 percent of capacity out," he said.
For the rest of this year, Smith forecasts modest growth in the global container industry.
"We see a similar year to 2012 with a lot of uncertainty and not a great deal of demand improvement. Last year global containerized trade grew by 2-3 percent this year it'll be more like 4-5 percent, but still with a lot of variability," he said.
"Europe looks flat and North America, a bit better. The best chances of growth are in China, Asia and the emerging markets, particularly India, the Middle East and South America are the stronger areas," he said.