Container shipping lines face new rates war

Sector is under threat from overcapacity and must avoid temptation to grab marketshare
Container shipping lines are facing another rates war unless they can maintain discipline and match supply and demand, according to industry observers.

At last week’s Intermodal Europe 2010, Doug Bannister, an analyst at Box Trade Intelligence and former Maersk Line UK boss, together with Arthur Worsley, a container derivatives broker for FIS, agreed that the industry was under threat from overcapacity.

Both questioned whether carriers would be able to avoid the urge to leave vessels in service, even when there was oversupply, in order to grab market share – as happened in 2009.

Bannister said: “2012 could be a disaster, because I think there is a lot of short-term memory and people may have forgotten what happened. 2008, 2009 and 2010 will be forgotten about by some of the more aggressive in the market.”

Worsley, who said rates had been declining for the last 22 weeks, added: “The idle fleet is 2.4% of the total, which is nothing compared with what it was before, and demand is on the decrease so it’ll be very interesting to see what happens with rates and capacity.

“What we could get to very soon is a tipping point where suddenly a full out rate war ensues. I know people will say the market has learned its lesson, but we don’t live in the conference era any more, everyone operates on their own and there is a lot of worry.

“It would only take one line to leave all their ships in the market and fight for marketshare and we could see the whole thing come crashing down before February.”

However, Soren Toft, VP of Maersk Line/Terminals, Intermodal and Equipment, said he hoped Maersk Line could show market leadership and help prevent a repeat of 2009.

Toft said: “It will take leadership, and leadership has to come from Maersk. We have not forgotten what happened nine months ago when shipping lines were in the biggest shambles that they have ever faced.

“It is very important to remember what happened then, even when the market goes up, because internally at shipping lines there is a tendency to say ‘I don’t remember what happened nine months ago and everything is fine’.” (source: IFW)

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