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Maersk Line: The industry has defeated overcapacity

The industry has defeated what was up until six months ago considered the dark unknown factor of international container shipping, overcapacity, says Maersk Line’s CEO Søren Skou, who points to three reasons why the agenda has changed.

Photo: Maersk Line

As late as February or March of this year, the agenda of the international container shipping industry could effectively be summarized in one word: Overcapacity!

According to Søren Skou, CEO of the world’s largest container shipping company, Maersk Line, overcapacity does not pose a problem this August 2012, though it might become a problem next year. But for now, the container shipping companies have demonstrated that they, through a series of initiatives, have been able to reduce the supply to a degree where Søren Skou feels that the continued discussion of overcapacity in 2012 has become pointless.

Slow Steaming

“If we look at 2012, we expect the capacity supplied this year to be at roughly the same level as the growth in the global market, maybe even a little bit smaller. And this is the result of three factors. Of course, the global fleet is growing – with around ten percent this year alone. But you actually have to deduct the ships that are scrapped, which is 1.5 percent. You have to deduct idle ships, this would typically be chartered ships that have been returned because we don’t need them anymore; this would be 4-5 percent this year. And in addition to this, you have to deduct the hips used for slow steaming, and that number has increased significantly this year,” says Søren Skou to ShippingWatch.

Slow steaming alone is responsible for Maersk Line offering 11,000 40-foot containers less per week than the company expected at beginning of the year.

Same number of ships

“We have the same number of ships, which basically means that the capacity we’ve withdrawn is being used for slow steaming. We’re doing this because the economy is good, the oil price is quite high, and so the benefits of slow steaming by far outweigh the cost of having an extra ship in the water.”

“We were facing a major challenge six months ago. Today, the industry has overcome that challenge, using these three initiatives. There will be another big challenge in 2013, which we will have to solve, something we can probably also do together as an industry. I can’t make decisions for the other companies, but Maersk Line has no plans to introduce capacity beyond the rate of the global market’s growth,” says Søren Skou.

Smedegaard: Definitely more potential in slow steaming

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