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MAERSK Line chief executive Eivind Kolding has warned that state bailouts of shipping lines could delay a very necessary restructuring of the container shipping industry.
Mr Kolding told Lloyd’s List that opposition to state bailouts for shipping lines was a matter of principle.
“Market forces cannot get a chance to play themselves out,” he said. “A restructuring that is very necessary will be delayed for some time. It is not good for the industry,” he said.
Mr Kolding warned that in the highly fragmented liner industry the delay in restructuring could be long enough to allow financing to return and more newbuildings to be ordered.
“There is a huge risk you will get into another situation of oversupply,” he said.
Although against state-aided bailouts of shipping lines, Mr Kolding said he could not blame individual companies for seeking help in order to survive.
Hapag-Lloyd is getting €1.2bn ($1.8bn) in loan guarantees from the German government, while the French government is looking into solutions to CMA CGM’s financial difficulties. The company has debts of $5.6bn.
Consolidation is seen as a necessary part of restructuring the industry. When there were 25 lines offering the same products there was a huge gravity towards consolidation, he said. The question was when and how consolidation would happen.
Mr Kolding said Maersk could take part in consolidation, but added that it could be argued it had already done its share. However, he said the shipping line was not working on anything now.
As to whether there would be bankruptcies among container lines, he said it was very difficult to predict, as this was very much in the hands of the banks and government intervention. It was more likely companies would find some way of restructuring rather than outright bankruptcies.
Mr Kolding said the outlook for container shipping would remain difficult next year.
“This year will be the worst for the industry,” he said. “I certainly think we will see improvements going forward.”
However, he said 2010 would still be a challenging year.
There have been some positive signs in the market over the third quarter of the year.
“We do see volumes going up, and expect modest growth in volumes,” he said
He noted freight rates had also improved in the third quarter of this year and is confident increases would hold up.
Mr Kolding said liner companies had learnt a lesson from the first half of the year that going for market share was a zero-sum game.
For its part, Maersk was targetting to maintain its current level of market share, which is around 15% globally.
As the slack season approaches, more idling and lay-ups of boxships is expected, although Mr Kolding declined to forecast how much it would increase from the current figure of around 10% of the global fleet idle.
“We have 2% of capacity in lay-up and that will increase a bit,” he said.
The line is also redelivering chartered vessels and there will be a net reduction capacity, including new vessels joining the fleet.
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