Maersk Says China?s Consumption Focus to Help Shipping

A.P. Moeller-Maersk A/S, owner of the world’s biggest container shipping line, said China’s efforts to boost domestic consumption and pare reliance on exports will help carriers as imports into the country may gain.

“With the new leadership coming and focusing on slightly different things, we will have more focus on domestic consumption, boosting the living standards of the Chinese population,” Chief Executive Officer Nils Smedegaard Andersen said in an interview. “It will create great opportunities for companies like us because imports will increase.”

Demand for toys, electronics and clothing in North America and Europe helped China become the world’s biggest exporter in 2009, boosting business for container lines. Policy makers in the world’s most-populous country are now trying to push the economy toward a more consumption-focused development path in their bid to boost growth.

“Increasing imports into Asia means that fewer container boxes will be moved empty, generating revenue for shipping lines,” said Shin Ji Yoon, an analyst at KTB Securities Co. in Seoul. “There has always been an imbalance in trade, where containers leave Asia full but return empty.”

Imports into China may expand faster than exports this year in percentage terms, Copenhagen-based Maersk said in an e-mail. The country’s imports by containers currently include basic industrial raw materials, electrical components and footwear.

Chinese Ports

Maersk has also invested in Chinese port terminals as it seeks to benefit from the nation’s trade. The company currently has investments in seven ports in China, including Shanghai and Guangzhou, through its terminal operating unit APM Terminals. The company in June said it signed a $673 million deal with the Ningbo Port Group to jointly invest and operate berths.

APM is planning to raise its stake in the venture to 33 percent from 25 percent because of the terminal’s potential, the company said. The new facility will be completed by 2014. Ningbo is China’s third-largest container port city after Shanghai and Shenzhen, handling 16.8 million 20-foot containers last year, according to Alphaliner.

“Terminal investments are a key focus for us,” Andersen said in Singapore yesterday. “We’re constantly following the opportunity. We want to invest in countries that really grow.”

Andersen said trade between Asia and Europe, the world’s busiest lane, will remain weak this year because of overcapacity and economic downturn in Europe. At the same time, demand for cargoes to the U.S. is picking up. Intra-Asia trade and shipments to other emerging markets, including Africa and South America, are also expected to grow this year, he said.

Rates Increase

Maersk is seeking to raise rates to Europe from Asia by $500 per 20-foot box starting April 15, after a $600 per container increase it sought a month earlier. Hanjin Shipping Co., South Korea’s biggest, is also looking at a similar increase next month.

Maersk Line, the container shipping unit, said in February that profit this year will be higher than the $461 million reached in 2012 as the company cuts costs and global container demand growth increases.

Maersk will take delivery of the world’s biggest container ship in June for trade between Asia and Europe. The company, which ordered a total 20 of these vessels dubbed the Triple-Es, will receive four more this year.

Triple-Es

CMA CGM SA, the world’s third-largest container shipping company, currently operates the biggest vessel that can carry 16,000 boxes.

The Triple-E ships, which will have rounded hulls, will have a fuel-efficient two-engine setup that’s too wide for current ships. It will also recover cargo capacity that is lost with tapered hulls, letting the ships carry 16 percent more boxes than vessels only a few meters smaller.

Combined with other technologies, the ships will use about 35 percent less fuel per box than vessels now used on Asia- Europe routes and produce around 50 percent less carbon emissions, according to Maersk.

“It’s part of our overall drive to reduce costs and it’s also part of our drive to reduce CO2 emissions,” Andersen said. “The Triple-Es will be the largest we will see for a while.”

Copyright 2013 Bloomberg.
Kyunghee Park and Haslinda Amin --With assistance from Anand Menon in Singapore. Editors: Vipin V. Nair, Christopher Jasper