CP SHIPS’ MILES SAYS INDUSTRY RECOVERY WILL DEPEND ON DEMAND GROWTH

CP SHIPS’ MILES SAYS INDUSTRY RECOVERY WILL DEPEND ON DEMAND GROWTH    The container shipping market's recovery from its overcapacity-driven phase will depend on how quickly cargo volumes will grow in the next few years, said Ray Miles, chief executive officer of CP Ships.
   “The big issue for us right now is supply and demand … and what impact it has on our industry,” Miles told the CI Shipping Forecast Conference in London.
   In 2001, world container trade increased by only about 3 percent, a level of growth described by Miles as “one of the lowest level in the last 20 years.” With too much ship capacity in the market, freight rates have decreased and carrier profits have fallen, he said.
   Transatlantic freight rates have decreased in each of the last four quarters at CP Ships, Miles reported. He also alluded to large losses faced this year by carriers in the Asian trades, where CP Ships has a small involvement.
   “The big question is how fast demand will recover to redress this situation,” he told the conference.
   Miles said world container shipping has increased by a compounded annual increase of 7 percent in the last 20 years, and demand growth will likely increase faster this year and next year. If there is strong economic growth in the United States and other economies, this will have a “multiplier effect” on container traffic growth internationally, he predicted.
   “When you are at the bottom of the cycle, it’s awfully hard to see it through to the next two to three years,” he said.
   Miles recalled that carriers stopped ordering ships after the Asian financial crisis of 1997, and suggested that the same may happen now, with few new containerships expected to be delivered in 2004.
   Many container shipping lines, including CP Ships-owned carriers, have rationalized services and vessel capacity, he noted. Miles cited the recent move by COSCO, “K” Line and Yang Ming to remove ships from the North Atlantic market to charter space on ships of CP Ships and the Grand Alliance carriers.
   He said he expects more vessel capacity-reduction initiatives by carriers on a trade-by-trade basis to lower ship network costs.
   However, Miles said industry conditions for container carriers will remain difficult through 2002 and maybe next year. He also expects further mergers and takeovers among carriers.