Container shipping industry in 'fragile' state

Maersk Line said companies should go slow in bringing back to service hundreds of ships idled during the recession, otherwise the sector will extend losses which totalled US$15 billion in 2009.

"The situation remains very, very fragile for the shipping industry," said Hennie van Schoor, Maersk Line's director of business performance, Asia-Pacific.

"It is balanced on a knife's edge," he said in a keynote speech at the Asia Pacific Maritime 2010 conference in Singapore.

As global trade slowed down during the global economic crisis last year, freight rates plunged and 11% of the world's container shipping fleet, or about 500 vessels, had to be parked.

In terms of volume, about 80% of world trade is carried by sea.

Van Schoor said there are signs of a pickup in global trade, with the United States and Europe importing more from the rest of the world.

But indications show this is being driven by companies stocking up on inventories rather than a surge in general demand.

He cited data showing that US imports rose 13% year-on-year in the fourth quarter of 2009, but retail sales in the same period expanded by only 1.0%.

For Europe, the continent's imports were up 3.0%, but retail sales climbed a mere 1.0%.

"What this is telling us is that the underlying demand for growth is not there yet," he said.

Van Schoor also cautioned against the idled ships going back into the market, saying it will further upset the imbalance between a glut in capacity and weak demand.

Source: AFP