Shanghai International Shipping Institute

A MARKED drop in container freight rates on the major east-west trades such as the transpacific and Asia-Europe has triggered concerns about ocean liner profitability this year, prompting Maersk Group CEO Soren Skou to call for an end to government subsidies for carriers.

"I don't think any government needs to throw money at container shipping," Mr Skou said at Singapore Maritime Week's 12th Maritime Lecture.

"In my mind there is no longer anything strategic about governments investing in shipping," said Mr Skou, adding that certain state-backed lenders have allowed ships to be built that were "not needed, for companies who were not profitable and who do not have a profitable business model."

South Korea's Hyundai Merchant Marine, Chinese state-run Cosco Shipping and Taiwan's Yang Ming all have benefited from government bailouts and low-cost financing for years, reported American Shipper.

HMM recently confirmed an order for 20 new mega containerships as part of its plan to expand its fleet's carrying capacity to one million TEU, a move that could jeopardise the slow progress shipping lines have made in managing capacity to help restore rates to a profitable level.

Commenting on the 350,000 TEU capacity order, SeaIntelligence Consulting chief executive officer Lars Jensen said the "problematic part is that this will double Hyundai's size - and a carrier suddenly needed to double its size in a year when you are the size of Hyundai will be disruptive in the market."

To be fair, Mr Skou and A P Moller-Maersk have a vested interest in seeing the end to government subsidies in maritime shipping. The company has been stumping for consolidation in the industry for some time now as a means of reducing competition and growing its own market share.

"This is a very competitive industry," added Mr Skou. "Even after we have consolidated, there are still more than 10 global carriers and we fight like only siblings can fight for market share."
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