[050111.EN.SEA] Outlook for 2011 is Good But Not Great

INDUSTRY insiders and observers have been stunned by how quickly and vigorously the shipping lines have managed to bounce back from their devastating losses last year.  Carriers enjoyed a sharp increase in shipping demand this year, while delays in vessel deliveries and slow steaming has helped stave off what many were expecting to be a supply surplus in 2010.  The container shortage, brought on by a lull in container manufacturing during the crisis, also helped create an environment where the lines were able to raise rates far beyond levels that were initially expected.  Maersk Line, the world’s largest shipping line, has already announced a profit of roughly US$4.2 billion for the first three quarters this year after a total loss of around $1 billion in 2009.  Other shipping lines are reporting quarterly profits into the hundreds of millions of dollars as well, but the key question that a lot of people are asking is whether the remarkable results witnessed this year will continue, or whether the current slowdown in the market is a sign of things to come for 2011. The consensus view appears to be neither.  In fact most analysts believe the industry will see a relatively solid year in 2011, but we should also not expect to see the dramatic highs and lows of the past two years.  "We think 2011 may not be as profitable as 2010, because demand surprise and the supply bottleneck (dislocation of container boxes) are diminishing,” UBS analyst Richard Wei said in a recent report on the Asian transportation sector.  Mr Wei believes that the ongoing freight rate slide on the major trades will likely bottom out either in the current quarter or in the first quarter next year, after which point we will see a return to more “normal” rate levels.  Source : CSM, 13.12.10.