‘Over-capacity in shipping industry will remain for five years’

Over-capacity in the shipping industry will remain for the next five years, said Maersk line Chief Executive Officer, Soren Skou.

According to him, there is need to remove capacity to create demand.

He said:”We will without doubt in five years- time from now have an industry with full capacity. We cannot create demand by lower prices. It is more important to remove capacity.”

Reuters Nordic Investment Summit explained  recently that when the economic crisis hit in 2008, global trade and shipping companies’ orders for new vessels were as much as 50 per cent of the existing fleet.

Reuters explained that the  overcapacity has driven spot rates on the main routes between Asia and Northern Europe to loss-making levels, according to Reuters.

Maersk Line cut its fleet container capacity by about 1 per cent between the second quarter of 2012 and the same period this year, but it has not announced any plans to cut further.

Shipping analyst Jacob Pedersen from Sydbank described the current market as brutal. “If competitors follow Maersk Line’s strategy and adjust capacity it will benefit the entire industry via significantly better freight rates,” he said.

Only two of the 12 big container shipping lines, Maersk Line and France’s CMA CGM, reported an operating profit in the first six months of 2013. Before the crisis, Maersk Line and other container shipping companies had growth in demand for seaborne containers of more than 10 per cent a year. But those days will not return, Mr Skou said.

“Growth in the container industry in the future is more related to global economic growth,” he said.

He said he expected global demand for seaborne containers to increase 2-3 per cent in 2013.

Parent AP Moller-Maersk Group lowered a near-term profitability target (return on invested capital) for Maersk Line to 8.5 per cent per year from 10 per cent recently. The long-term profitability target for the container business was held at 10 per cent.

To cope with the tough market conditions, Maersk Line managed to reduce total costs per container by 12.7 per cent in the second quarter from a year earlier. The decrease was mainly driven by lower fuel costs and logistical route efficiencies.

In addition, the company has ordered 20 Triple-E class mega vessels with a capacity of 18,270 TEU each. The vessels use 50 per cent less fuel per container than the average container ships deployed on routes between Asia and Europe.

“And they are 20 per cent more fuel efficient than Emma-class ships that are the biggest and most efficient at the moment,” said Mr Skou

Meanwhile, the  winner of PortTech LA’s Best Business Model Award has explained that  Energy consumption at ports and terminals can be reduced by up to 80 per cent  if Light Emitting Plasma (LEP) is used for high mast applications

American lighting expert, Bright Light Systems (BLS), also says that initial investment in LEP is paid back through power savings in less than two and a half years, which gives LEP the edge over LED in this regard.

Brad Lurie Chief Executive Officer, Bright Light Systems, said to Port Strategy: “We have proven our technology and approach in the market place and are in a position to scale and accelerate our growth. Our product is far beyond beta testing or trials and we are winning business today using technology in a market that has been stagnant for nearly 50 years.”

Lurie also pointed out that LEP like LED, has longevity and reliability, but has a much greater lumen density (up to 200x greater) and can distribute light evenly across wide areas.

For example, he said that the BLP1000 fixture only consumes 550 watts and distributes light nearly three times more efficiently than a 1000W High Pressure Sodium (HPS) fixture, providing increased visibility, safety and security.

According Port Strategy publication, they are particularly suited to outdoor high mast lighting applications such as ports, parking areas, rail and container yards.
Source: Guardian