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2008 May 26   07:02

Maersk shoots down concerns of capacity exceeding demand

Concerns have been raised that the supply/demand situation in the shipping sector will deteriorate over the coming years due to a combination of weakening demand and large orders for new container vessels. Shipping giant A P Moller-Maersk Group, however, disputes this and strongly believes demand will continue to outstrip supply.
"If you look at the figures provided by well-reputed independent analysts, such as Drewry and Clarkson, it is clear that this view that supply will be in excess of demand is not supported by hard numbers,'' said Jesper Larsen, country manager for Maersk Line Philippines.
"Both groups are forecasting fairly solid global GDP growth," he said. "GDP growth is a key driver of demand growth. It is evident that while the world economy is expected to slow down in 2008, it is still well above the long-term average of three percent."
The forecasts also indicate container demand will be robust and capacity growth is likely to slow down from peak levels.
"While the supply/demand balance will indeed soften over the next few years,'' Larsen said, "it is likely that we will end up around the healthy 2003 levels where we, particularly over the peak season, saw demand exceed the supply of shipping capacity.''
According to Larsen, Drewry sees "the outlook for 2008 as a fairly healthy one on the global demand front, and forecasts a small uplift in freight rates for ocean carriers and continued impressive growth in the Far East, Europe and Mediterranean trades."
Larsen said that the current climate of the shipping industry was "no doubt influenced by the development of the world economy''. Although over-all growth decreased at the end of 2007 due to slower growth in the US, Europe and Japan, both Drewry Shipping Consultants and Clarkson estimates show that the world economy still improved by approximately five percent last year. This translated into a growth in the global container market of about 10 percent in 2007, with a total increase in tonnage of around 15 percent.
Regarding bunker surcharges, Larsen said, Maersk Line has a total consumption of well over 10 million tonnes of bunker fuel a year, and carriers could not continue to pay all the costs of rising fuel prices while at the same time sustaining high service levels on the various trades.
"What we need is a fair and equitable solution that allows us to share the risk with our customers in a simple and transparent manner," Larsen stressed.
"We recently introduced a new bunker adjustment formula, which has generally been well received by our customers. It is an attempt to provide a hassle-free, transparent process for adjusting rates in response to one of the most unpredictable aspects of the container shipping business environment."
Regarding the end of the shipping conferences regime in October, Larsen said: "Freight rates have always been set by the market forces and will continue to be so. We have seen that clearly from the consistent reduction in freight rates made possible by improved productivity in the container industry combined with competitive pressure.
"The demise of shipping conferences should see the disappearance of old-fashioned rhetoric and the emergence of a new will to jointly pursue productivity benefits. With the end of shipping conferences, we now have the opportunity to start on a clean slate by creating a better dialogue between shipping lines and our customers.''

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