[250915.EN.BIZ] Better Balance In Shipping Supply-Demand in 2016: Hapag-Lloyd CEO

THE long-term overcapacity problem that has contributed to the extreme rate volatility and reduced carrier earnings on major container shipping trades is set to ease, according to the chief executive of Hapag-Lloyd, Rolf Habben Jansen.

Speaking at the Journal of Commerce's Container Trade Europe conference in Hamburg, Mr Habben Jansen said several fundamentals would begin to address the supply-demand imbalance that has afflicted shipping trades in recent years, the London's Loadstar reported.

"Before we all jump into despondency, this is actually quite a healthy industry," he said. "In 2014, the global container trade was about 20 per cent above what it was in 2008, while many economies around the world haven't shown that sort of growth."

He argued that while the growth of capacity had been significant over the past 10 years - and especially this year - over the next 18-24 months it would be less-than or at least equal to demand growth.

Mr Habben Jansen also argued that the current generation of ships were unlikely to be superseded any time soon, because "as you go larger, the incremental benefits of bigger ships diminish.

"We are starting to reach the limits of what makes economic sense, which means that that whole wave of investment is beginning to slow down," he said.

However, it is next year's opening of the Panama Canal that could have the most dramatic effect on the supply-demand balance, as the current maximum size of 4,500 TEU increases to around 12,000 TEU.

"At some point in 2016, you will have a whole class of [smaller] ships that will become uneconomical. What will we do with these vessels, which currently represent 20 per cent of the global fleet?

"Perhaps some will become feeders or find employment on the intra-Asia trades, but I would argue that over the next seven years these vessels will be scrapped. So that 20 per cent would represent a three per cent reduction per year over that period. It doesn't make sense that in an industry which is so cost-conscious that will continue to operate these ships," he said.

Source : HKSG.