Global container ship operators, hammered by high costs, oversupply and flagging demand, are cutting shipping capacity to shore up freight rates depressed by a sluggish global economy, according to a Reuters article.
Many container carriers have been losing money since the third quarter as freight rates fell sharply, mainly due to a supply glut, industry experts said at a regional logistics and maritime conference recently.
The Shanghai Shipping Exchange's China Containerised Freight Composite Index fell about 12% this year to 923.7 on Friday. Freight rates on the China-Europe route have tumbled about 35%.
The shipping industry is a barometer for the global economy as it accounts for more than 80% of international trade volume.
Maersk Line, a unit of Danish shipping and oil group AP Moller-Maersk AS and the world's largest container ship operator by volume, is considering idling some of its ships, especially those on Asia-Europe routes.
"We are looking to see whether we should take some ships out of the Asia-Europe route," said Tim Smith, chief executive of Maersk Line's North Asia division.
Maersk Line posted a loss for the third quarter and said it expected to stay in the red for the whole of this year.
"I think it's very clear now that we've seen, collectively, we're ordering more capacity than we really need for the short term," Smith told reporters on the sidelines of the conference.
Tung Chee Chen, chairman of Orient Overseas (International) Ltd, said on Friday that his company had cut Asia-Europe route capacity by 20%.
The Hong Kong-based container ship operator is struggling with rising operating costs as a result of higher fuel prices, Tung said on the sidelines of the conference.
"The outlook will eventually depend on Europe's situation, and whether the debt crisis can be resolved," Tung said. "But in light of today's situation, next year will not be promising."
China's Vice Minister of Transport Xu Zuyuan said the global shipping industry was mired in a prolonged downturn and there was no consensus on when operators would see a light at the end of the tunnel.
Full story by Reuters