UPDATE 1-Maersk Line sees potential for better 2013

Fri Jan 11, 2013 7:36am EST

* Sees 2013 Asia-Europe vol up 4-5 pct, Asia-U.S. up 5-6 pct

* Doesn't think it, industry need new capacity for few yrs

* May cut Asia-Europe capacity again if market turns quiet

* "Triple E" vessels to come on stream from July

By Alison Leung

HONG KONG, Jan 11 (Reuters) - A pick up in freight rates and world trade could help Maersk Line, the world's biggest container shipping operator, achieve better results in 2013 despite excess capacity in the industry, its North Asia chief told Reuters.

Maersk Line, a unit of Danish group A.P. Moeller-Maersk and b arometer of world trade as its fleet carries more than 15 percent of all sea-borne containers, returned to profit in the third quarter thanks to a rebound in shipping container rates, after four consecutive quarters of losses.

"We hope to be able to build on this momentum and deliver overall returns which provide an acceptable return on the capital we invest," Tim Smith said in a telephone interview.

"In this regard, we believe 2013 provides some potential to deliver a better result than 2012, although market conditions remain challenging."

Maersk Line did not have any immediate plan to invest in new ships, preferring to grow with the market in terms of capacity.

"We don't want to do anything to undermine the fragile supply and demand balance," Smith said, adding he did not believe the industry needed new capacity for a couple of years.

MORE LAY-UP EXPECTED

International shipping firms have since 2011 been hit by a global economic slowdown and an oversupply of vessels.

BOCOM International forecasts 7.2 percent net growth in the global container fleet in 2013, outstripping a 4.5 percent rise in shipping demand.

Carriers have to resort to lay-up and slow steaming to reduce the effective capacity of the global fleet to support freight rates above breakeven levels.

A gradual recovery in the U.S. economy was positive, although the weak European economy would likely remain a concern in 2013, said Geoffrey Cheng, an analyst at BOCOM.

Maersk Line cut Asia-Europe capacity further in the fourth quarter, bringing the total capacity reduction in 2012 on its Asia-Europe network to 21 percent before it brought back some of those sailings in December.

"We are moving up and down on a great roller-coaster the whole time," Smith said.

Asia-Europe trade was likely to be quiet in the second part of the first quarter due to seasonal reasons and the company may have to take some ships out or idle them, he added.

About 5 percent of the global container fleet was idle at the end of last year, totalling 809,000 twenty-foot equivalent units (TEU) and the number may rise to one million TEU in February, according to industry consultant Alphaliner.

However, Smith predicts Asia-Europe container volume could rise 4-5 percent in 2013 compared with an estimated increase of 5-6 percent in Asia-U.S. trade.

That would be an improvement from estimated flat volume growth in Asia-Europe and a 2.9 percent rise in Asia-U.S. trade last year, according to data from shipbroker Clarkson.

Transpacific demand would depend on what happens with U.S. budget talks. "It seems like they got past the immediate deadline but there is still quite a lot of work the government needs to do to get the economy sorted out, hopefully not to dampen demand too much," Smith said.

Low investment returns from the industry in the past few years have seen A.P. Moeller, parent of Maersk Line, refrain from investing significantly in its shipping business.

The best way for Maersk Line to justify future investment was to consistently meet its return on capital target of 10 percent or above, Smith said.

Maersk's return on capital was likely to be in the single digit range in 2012, way below target, he added.

However, Maersk's current fleet and order book was sufficient to meet its needs for the next 2-3 years.

Maersk's 20 mega container ships of 18,000 TEU called "Triple E" are coming on stream from July through 2015. These ships, the biggest of their kind in the world, will be deployed on Asia-Europe trade.

"When we bring in these bigger ships, we will take other ships out in order to make sure that overall we don't put more capacity into the trade than we need," he added.