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Maersk Line: U.S. economy crucial to 2013 results

Maersk Line’s Chief Executive of the Asia Pacific Region, Thomas Knudsen, believes next year will bring rate increases in the Pacific. Yet the economic development in the U.S. in 2013 remains a joker, says Knudsen to ShippingWatch.

Photo: Maersk Line

From Maersk Line’s Asian headquarters in Singapore, the most important route to Europe is just one of the challenges to be faced in 2013, even though said route constitutes no less than 40 percent of the company’s business. The entire Pacific area and the routes to the U.S. could hold the crucial positive effect on how the Asian business will develop next year.

While the major companies have had an incredibly difficult time of raising rates on Asia-Europe, the Pacific business is doing much better, and the members of the Transpacific Stabilisation Agreement continue to discuss and lay down suggested prices for the market. Most recently, the TSA recommended that its members raise prices with 400 USD per FEU on the U.S. West Coast and 600 USD per FEU to other destinations from December 1st onward. According to Thomas Knudsen, the higher prices in the Pacific may indeed be adopted.

”Both in the third and fourth quarters, it looks like we will see better rates on the Transpacififc. Less capacity has been introduced, and our ships to the U.S. West Coast have had a capacity utilization of 90 percent so things are looking positive, and we are hopeful that the market will continue its positive development next year,” says Thomas Knudsen in an interview with ShippingWatch.

U.S. means everyting

Entirely crucial to the development in the Pacific and, for many, also to the Europe route, is the economic development in the U.S. and above all, whether the government will find a solution to its critical financing problem, the so-called fiscal cliff.

”The final development depends on the U.S. Therefore, it is difficult to accurately predict the development of next year, but if the U.S. can solve its economic problems, there is reason to feel optimistic about the Pacific,” says Maersk Line’s Chief Executive of the Asia Pacific Region.

The expectations toward the Pacific are crucial at a time when the main route to Europe is looking particularly grey. The rate increase announced in November has been effaced, and more and more market players are doubtful that the next rate increase, announced to take effect in mid-December, will materialize.

Add to this the fact that several of the major container companies have chosen not to withdraw capacity on the route, unlike Maersk Line, Hanjin, and Cosco. CMA CGM has introduced its new 16,000 TEU container ship, Marco Polo. Next summer, Maersk Line will introduce one of its first 18,000 TEU Tripe-E ships, even though the economic development in Europe does anything but justify new larger tonnage with an expectation of negative or zero growth.

“In volume, Asia-Europe was looking good in the first 4-5 months of 2012. The negative growth we have seen in the third quarter has continued into the fourth quarter. We believed we needed to remove capacity from the route and we think we have done our part,” says Thomas Knudsen. However, he does not wish to comment on who has not contributed to reducing tonnage.

Triple-E cooperation

Knudsen does not believe that one should necessarily expect the new Triple-E ships to be filled from the day they set sail, but that the new fleet should be broadly viewed. Partly they can enter into shared sailings with other companies, partly they will replace other tonnage, and partly one must “look forward” in order to make estimations about the investment.

“Generally, Triple-E will result in more capacity. Triple-E fits well with our goals of growing with the market, but in the beginning, we are of course talking about a phase-in. We saw that with the E-class as well, which has room for 15,000 TEU and has now sailed for 3-4 years,” says Thomas Knudsen.

Knudsen is convinced that the expectation of Asian growth in the long term will prove correct. Maersk Line has high hopes for a list of select Asian markets in particular. These countries include Malaysia, Thailand, Vietnam, and Myanmar, in which the company is setting to work on an expectation of 2013 growth from 4.7 percent (Malaysia) to 6.0 percent (Vietnam), and even higher numbers in the still relatively small markets such as Papua New Gunea and Myanmar. Singapore is also expected to bounce back from a 2012 growth of 1.7 percent to 4.1 percent next year.

“We are seeing how some of the new markets are taking over growth from China. In the long term, we believe that the growth in Asia will stay high,” says Thomas Knudsen.

Shipping analysts: Container rates to remain still into 2013

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