In an interview with The Shipping Herald, Managing Director of Maersk Line for Greece, Bulgaria and Cyprus, Mrs. Anne O. Gronbjerg, explains why Maersk “expects annual container demand growth will slow to between 5 and 8 percent in the next few years” and how the industry “must adapt to customers’ changing needs”. She also provides us with insight on tackling the problem of excess capacity as well as the future of container shipping activities in Greece.
Q: The shipping industry has had a tough year in 2011, a time when more than two-thirds of shipping companies in the world reported financial losses. How do you see containerized trade demand forming in 2012?
This is so very true; the container shipping industry lost an estimated $5.2 billion last year, according to Drewry Shipping Consultants. We forecast that container demand growth will slow to between 5 and 8 percent in the next few years compared to an average of 10 to 11 percent over the past 25 years as Western economies weaken, manufacturing activity in Asia slows, and products become smaller in size. The outlook in terms of financial performance is very uncertain, as both revenues and key cost items are subject to major fluctuations.
Q: Are you concerned at the oversupply of tonnage currently witnessed in the container sector particularly?
As an industry, we have been investing ahead of demand, this is a reality. As demand has been slowing down, we do expect to have a situation with excess capacity over the coming years.
After a hard year for the industry, as already mentioned, we are beginning to see companies lay ships up in an effort to support the increase in freight rates they have been announcing on the major east-west trade lanes since the beginning of the year.
What has been done so far is that container shipping lines have idled about 5 percent of global fleet capacity, or 800,000 20-foot equivalent units, as demand for container shipping space slows.
As Maersk Line, we are tackling the problem of excess capacity by doing more slow steaming and introducing super slow steaming - running ships at slower speeds which requires more ships per string.
We do not have any laid-up ships at this point. But we are certainly not ruling out laying up ships over the summer if the market is growing less than what we expected.
Also, letting time charter contracts expire this year can take out an additional 9 per cent of our fleet capacity.
Q: What are the latest Maersk initiatives in the emissions reduction effort?
Right now we are concentrating our environmental efforts to reducing fuel consumptions and CO2 emissions, coinciding with our need to reduce fuel consumption. Introducing slow steaming to new routes (e.g. Pacific Ocean) will have a positive effect in lowering emissions even further.
Q: Can you give us some insight on the company's rate strategy in the near future in the current market?
At this point it is evident that freight increases are happening. To achieve rate increases, there has to be some fundamentals to support it in terms of supply and demand. What is supporting it is that the industry is taking out capacity.
Q: What challenges lie ahead for shipping considering the ongoing financial crisis?
The industry must adapt to customers’ changing needs – for example, many have reduced buffer stocks in response to cost saving needs, increasing their need for supply chain reliability – and at the same time achieve a sustainable level of returns throughout the business cycle. Neither customers nor shipping lines can be satisfied with the current extreme volatility in annual financial results. It destabilizes the service we can deliver to our customers as an industry, and makes it difficult for them to plan both their transportation cost base and their weekly transport pattern.
Q: How do you see Maersk's presence in the Greek market in particular? What has the impact of the country's debt crisis been on the company and what is your view of Maersk's future presence in Greece?
The A.P. Moller - Maersk Group and her container shipping brands – Maersk Line, Safmarine and now also Seago Line – is absolutely dedicated to the Hellenic market. We have had own offices here since 1997 and we will continue to serve our Greek customers through those offices, with the best services possible.
We are fully committed to Greece as a country and as a market, and the current challenges do not change that at all.
As part of the economic cycle, container shipping activities in Greece have also been affected by the crisis. Long term, we remain confident that there is an opportunity for the whole economy to recover and we believe that Maersk Hellas can play an important role by providing its reliable services to Greek companies. And on a positive note, we do see that healthy, well-run companies do still thrive and grow - even at this difficult time for Greece.
Anne Odgaard Gronbjerg is Cluster Top and Managing Director of Maersk Line for Greece, Bulgaria, Cyprus and F.Y.R.O.M.