Maersk Line, the world’s biggest container shipping company, said demand for trade on the Asia- Europe route is expected to grow until Lunar New Year in February as Chinese manufacturers produce and export more.
Imports into China have also helped increase demand as raw materials are shipped to Asia’s largest economy for final assembly while local consumers increase spending, Tim Smith, head of north Asia operations for Maersk Line, said in a Bloomberg Television interview in Hong Kong today.
A year-end surge in demand also prompted the container line, owned by A.P. Moeller-Maersk A/S (MAERSKB), to put some unused ships into service after idling 21 percent of its fleet last year, Smith said. Mediterranean Shipping Co. and Hanjin Shipping Co. (117930) were among carriers that parked some of their ships in the fourth quarter as freight rates fell on excess capacity and a slump in demand from debt-stricken Europe.
“In December, we saw nice uptick in volume running up to the year-end, and we expect that to continue into Chinese New Year,” Smith said. “We had too much cargo in the last few weeks that we had to roll containers back to sailings.”
Chinese production and retail sales topped estimates in November, while industrial companies’ profits expanded for a third straight month. The government is spending more on infrastructure projects, including adding more rail lines and roads, to help boost the economy.
The final December reading of a purchasing managers’ index by HSBC Holdings Plc and Markit Economics was 51.5, the highest in 19 months, after a 50.9 preliminary reading and a final 50.5 in November. The HSBC index focuses more on smaller businesses with a level above 50 indicating expansion.
“Chinese domestic market spending seems to be quite strong,” Smith said. “It’s certainly looking more optimistic than it has been.”
Spot rates on cargo hauled to Europe from Asia rose 28 percent in December, according to data from the Shanghai Shipping Exchange.
While demand is expected to be “strong” until the Lunar New Year, trade may slow for the remaining part of the first quarter as factories in China stay shut for about a week for holidays, Smith said. This year’s Lunar New Year is on Feb. 10.
With an excessive supply of new ships and weak demand in Europe, it will be a challenging year for the container-shipping industry, Smith said. Accelerating world trade is expected to push up fuel oil consumption to a record this year, driving ship owners’ biggest cost to a record.
While the International Monetary Fund says world trade will grow 4.5 percent this year, from 3.2 percent in 2012, that may not be enough to curb the glut of shipping capacity that means most carriers are losing money.
Global capacity in the container ship industry may grow 9 percent this year as new ships are delivered, including Maersk’s addition of the world’s biggest vessel to its fleet, Smith said today. That compares with estimated growth in total demand of about 5 percent, he said.
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