Monday, September 24, 2012
China’s shipping lines expect downturn to last through 2014
China’s largest shipping lines estimate the downturn in the market will continue through the next two years. New ships will enter the market, exacerbating overcapacity, as the economy experiences slower growth.
“I fear the future two-to-three years will still remain in a downtrend,” Wei Jiafu, Chairman of China Ocean Shipping Group Co. (COSCO), said yesterday at a conference in Xiamen, China. “Many people don’t have confidence.”
Container, commodity and oil carriers are all dealing with lower rates and too many vessels. Container lines are reducing trips on the Asia-Europe because of lowered demand, and the Baltic Dry Index, a barometer for commodities shipping, has dropped 60 percent over the past 12 months.
“In the coming two years, it’s unlikely that the world shipping sector will bottom out,” said Xu Lirong, general manager of China Shipping Group. Companies should increase cooperation to help ease the slump, he said.
China Shipping Container Lines, a unit of China Shipping Group, declined 7.9 percent this year on the Hong Kong stock exchange. China Shipping Development, the company’s tanker arm, plunged 31 percent.
COSCO’s primary group, China Cosco Holdings, has dropped 18 percent this year.
At the conference, Wei said COSCO might follow the lead of global shipping giant A.P. Moller-Maersk, and diversify in areas outside the shipping arena. He said COSCO is looking for investments that would complement its cargo business, similar to how oil has helped to offset Maersk Line losses.
Shipments along the Asia-Europe route have dropped 13 percent year on year, according to Kuehne and Nagel, the largest organizer of maritime cargo shipments.
Due to better economic growth in the U.S. and a revival of the housing market, the trans-Pacific route is fairing better. Mediterranean Shipping Group recently launched the largest container vessel ever to serve a U.S. route, with a capacity of 13,800 TEUs.
For more of the Bloomberg story: www.businessweek.com
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