Thursday, October 18, 2012
NOL exec likes higher U.S. demand, but says won't offset EU debt crisis
U.S. demand for China's goods is slowly returning, according to Neptune Orient Lines President Ng Yat Chung and others, but it's too slow to balance low European demand anytime soon.
Weak exports have precipitated a slowdown in China's economy, which in the third quarter grew 7.4 percent, its slowest rate since the downturn. But last week Chinese officials said September exports were up 9.9 percent year on year, boosted by U.S. consumer demand.
In an interview on Thursday, President and Chief Executive Ng Yat Chung of NOL said "exports from this part of the world have fallen off a cliff, mainly due to demand problems in Europe, and I don't see that turning around any time soon." Neptune Orient owns APL, a major carrier of goods from China to Europe and U.S. markets.
While attending a shipping-industry conference in Shenzhen, Ng said improving U.S. demand "is certainly helpful."
Still, that could change fast, he said, stating, "consumers can be fickle, so to what extent the U.S. government addresses the so-called fiscal cliff issue is going to have a material impact."
Another shipping company, Orient Overseas Container Line, has experienced some slow North American growth "even though the economy has not fully recovered in the U.S.," said Stephen Ng, director of trades.
A number of manufacturers of products from furniture to power tools in China said they saw hope in the increase in U.S. demand.
The slowdown in trade has the shipping industry struggling. Neptune Orient, which is 66 percent owned by Singapore state investment company Temasek Holdings, announced a net loss of $118 million in the second quarter, more than twice as large as the year-earlier loss of $57 million.
"Temasek is very much focused on returns," said NOL chief executive Ng. "It's my job to prove that we are the right management team to back and that we have a way out to create shareholder value." The company is poised to achieve $500 million in savings this year, he said.
Neptune Orient has 34 ships worth $4 billion on order that will be delivered by early 2014, further exacerbating industry-wide overcapacity.
Ng was encouraged by A.P. Moller-Maersk's recent decision to lower capacity, and that others are following suit. "It's a sign of optimism that carriers are behaving well."
For more of the Wall Street Journal story: online.wsj.com
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