New Maersk Line CEO Soren Skou does not expect container shipping lines to buy over or merge with other lines in the coming years, despite the current shipping downturn that has resulted in lines haemorrhaging losses, reported Business Times Singapore.

“Frankly, I'm not expecting a huge amount of consolidation in the coming years. Over the last year, we had expected to see consolidation, which has not really happened. One can speculate that it has to do with the ownership structure in the industry,’’ Skou told reporters yesterday during his visit to Maersk Line's Singapore office.

“We would like to see more consolidation. One of the reasons why the industry has a fundamental problem with profitability is that it is too fragmented. The top 10 carriers only control 62 per cent of capacity.’’

At the same time, there may be more opportunities for lines to strike up more alliances and vessel sharing agreements on Asia-North America lanes.

“There are not a lot of opportunities on Asia-Europe. More could happen on the Pacific. There will be more alliances developing in 2012 in very specific trades, but the opportunity for big global alliances are gone,’’ said Skou, who is in his eighth week as Maersk Line global CEO.

Skou said at a media roundtable held yesterday that container lines have invested in capacity ahead of demand, resulting in the current overcapacity situation.

In his view, growth in container volumes will slow to five to eight percent from 10-11 percent seen over the past 25 years because of moderating trade between Asia and the West.

Maersk Line, which has declared that 2012 will likely be another loss-making year for the container line, is tackling the problem of excess capacity by doing more slow steaming – running ships at slower speeds, which requires more ships per string.

Maersk Line ships on longer-haul Europe to Asia routes are averaging about 18 knots currently, but it can go down further to “super slow steaming’’ levels of 12 knots.

That could “take out about up to 10 per cent’’ of capacity and save the company “many millions’’ in bunker fuel costs.

Already, Maersk Line would have reduced 9.5 per cent of Asia-Europe deployed capacity by April through its vessel sharing agreement with CMA CGM as well as the introduction of its Daily Maersk service last year.

But Skou said Maersk Line has other tools in its kit to manage fleet capacity.

For instance, by letting time charter contracts expire this year, it can take out an additional nine per cent of its fleet capacity.

Moreover, it is not ruling out the option of laying up ships over the summer, although no Maersk Line ship has been pulled out of service and idled yet.

An estimated five percent of global capacity or 800,000 TEUs are currently mothballed, but Skou doubts the figure will reach the one million TEUs laid up in 2009.

Indeed, these scenarios may not come to pass, given that rate hikes introduced by all container shipping lines in March successfully doubled freight rates.

Last year, a series of announced increases failed to materialise in reality, but Skou thinks 2012 will be different.

“I'm fairly confident that those freight increases will happen. To achieve rate increases, there have to be some fundamentals to support it in terms of supply and demand. What is supporting it is that others are taking out capacity,’’ said Skou.

Source: Cargonews Asia