Container Lines Need to Cost Cuts for Profitability in 2014

Maersk Line's Thomas Knudsen predicts another tough year

Container carriers must reduce their costs, through alliances and other means, to achieve profitability in 2014, Singapore newspaper The Business Times reports.

"This year will continue to be another challenging year for container shipping," said Thomas Knudsen, CEO of Maersk Line in the Asia-Pacific region.

"We foresee global container demand to be higher than last year, but still in the range of 4-5 per cent, which is below the historic average."

East-West trade routes will grow less than North-South routes, he said.

Knudsen said that, barring big increases in slow steaming and scrapping or idling of ships, overcapacity will remain a challenge as supply grows at a projected 6 percent.

Rahul Kapoor, director of Drewry Singapore, said the growth in supply reflects carriers' orders for large ships that provide greater operating efficiency.

He said overcapacity will remain a problem in coming years, with a full recovery unlikely until early 2016.

Kenneth Glenn, president of APL, said new regulations could contribute to difficulties for carriers.

"Ports in California will begin enforcing cold-ironing regulations on vessels at berth, while liners must also start preparing for their ships trading in the Emission Control Areas (ECAs) to consume marine fuel with sulphur content not exceeding 0.10 per cent," he said.

Glenn added that carriers will likely rely more on alliances, including forming more extensive partnerships to improve efficiency.

"Existing alliances will also up the ante by expanding their cooperation, introducing new routes or beefing up current services," he said.

The proposed largest-ever container alliance, P3, is expected to be operational by the middle of the year.