Third quarter not expected to augur well for global shipping in 2012

EVEN though the shipping industry usually enters its peak season during the third quarter of the year, it now finds itself struggling as the world economy continues to grow sluggishly and China growth slows, reports Xinhua.

Amid these circumstances, many companies are saying that they expect tough market conditions to persist for another few years.

Losses have been widespread in the industry with a first half loss of CNY4.87 billion (US$766 million) posted by state-owned China Cosco Holdings, its sixth straight quarterly loss.

State-owned China Shipping Container Lines posted losses of CNY1.28 billion during the first half, widening a CNY630.3 million loss in the same period last year.

Shipping companies blame industry-wide problems as well as surging oil prices, an oversupply of vessels, depressed freight rates and the world economy's lacklustre recovery.

Meanwhile, the peak season for the shipping industry third quarter when many western retailers place Christmas orders, is not expected to see much of an increase in cargo volumes this year, they said.

"We expect the global container demand to bottom out in the third quarter before improving somewhat in 2013," said Maersk Line CEO Soren Skou.

The world's largest carrier forecast that global demand for shipping containers will remain weak in the near future due to the slowdown in the world economy.

Compared with an average annual growth of 10 per cent during the past 45 years, "we expect global container demand growth to stay at five to eight per cent in the next few years," Mr Skou said.

At the same time, the companies laid up their ships. According to data from Alphaliner, the global volume of the idled containership fleet surged by three times from last year to 467,000 TEU at the end of July.

These steps have helped shipping lines restore profits, analysts and carriers said. Shipping lines still find that freight rates are too low to let them make profits and have announced plans to increase them further.

Maersk Line said it plans to raise them by between 10 and 20 per cent for its Asia-Europe route on November 1.

"We expect rates to hold up somewhat, but potentially with a sliding tendency if deployed capacity reveals itself as abundant," said Peter Sand, chief shipping analyst at the Baltic and International Maritime Council (BIMCO).