REUTERS SUMMIT-Maersk Line sees shipping overcapacity for next 5 yrs
(For other news from the Reuters Nordic Investment Summit, click here)
* Maersk Line CEO expects no easy solution for overcapacity
* CEO says growth rate from before crisis will not return
By Ole Mikkelsen and Stine Jacobsen
COPENHAGEN, Oct 2 (Reuters) - Maersk Line, the world's biggest container shipping company, sees no quick fix for overcapacity in the industry that will continue for at least the next five years.
"We will without doubt in five years time from now have an industry with plentiful capacity," Maersk Line Chief Executive Soren Skou told the Reuters Nordic Investment Summit on Wednesday. "We can not create demand by lower prices. It is more important to remove capacity," Skou said.
Maersk Line, part of oil and shipping group AP Moeller-Maersk Group, is a bellwether of global trade as its ships make up 15 percent of world container shipping capacity.
The shipping industry has been battling overcapacity since the financial crisis because new vessels ordered before the downturn have flooded the market.
When the economic crisis hit in 2008, global trade and shipping companies' orders for new vessels were as much as 50 percent of the existing fleet.
The overcapacity has driven spot rates on the main routes between Asia and Northern Europe to loss-making levels.
To cope with the tough market conditions, the group managed to reduce total costs per container by 12.7 percent in the second quarter from a year earlier.
Before the crisis, Maersk Line and other container shipping companies had growth in demand for sea-borne containers of more than 10 percent a year. But those days will not return, Skou said.
"Growth in the container industry in the future is more related to global economic growth," he said. He said he expected global demand for sea-borne containers to increase two-three percent in 2013.
Parent A.P. Moller-Maersk Group's lowered a near-term profitability target (return on invested capital) for Maersk Line to 8.5 percent per year from 10 percent at the group's capital markets day last week. The long-term profitability target for the container business was held at 10 percent.
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