Mr Kim who is head of Goldman’s Pan Asia Transportation team stated that the return to profitability would be fragile and would largely depend upon whether the carrier companies could remain disciplined over the coming months and years in terms of controlling supply and the setting of freight rates.
"Profitability is really in your hands" he said Mr Kim, who has been propounding this view over the last eighteen months, admitted that, relative to his peer group, his predictions were on the optimistic side.
However, he said that they were justified because following the financial crisis as there was now a much clearer understanding of the container industry by the equity markets, and that an analysis of current supply and demand dynamics has led him to this conclusion.
Explaining this optimism, the Goldman Sachs analyst said that at the beginning of the year predictions for growth in demand on the long haul shipping trade lanes of Asia-Europe and the transpacific for 2010 was 12 per cent and for 2011 it was only about 5 per cent.
These numbers have now been revised upwards to 13 per cent for 2010 and, more significantly, 10 per cent for 2011. The situation on the supply side of the equation is also looking positive with growth of about nine per cent this year and the same again predicted for 2011.
The resulting tip in the balance in favour of demand is about four per cent this year and about 1 per cent for next year. Mr Kim said demand predictions had risen as the bank’s economists were generally sanguine about global growth. "We are looking at about 4.6 per cent GDP growth this year and 4.7 per cent next year,” he said.
As expected China would remain the key driver for global growth with the other BRIC economies of Brazil, Russia and India also being important contributors to growth. Mr Kim also warned of potential risks to his forecast with the precarious state of the Euro being an obvious concern.
Source : CSM, 09.08.10.
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