Port of Long Beach CEO anticipates further pain for container shipping lines

Global container shipping lines will face one or two more years of pain as the industry consolidates amid overcapacity and weaker demand, Port of Long Beach CEO Jon Slangerup said.    Global container shipping lines face one or two more years of pain as the industry consolidates amid overcapacity and weaker demand, according to the Port of Long Beach’s chief executive officer.
   Cheap credit and low fuel prices are propping up weak players and delaying the mergers and alliances needed to resolve the crisis, Jon Slangerup, CEO of Long Beach, the second-busiest U.S. port, said in an interview in Geneva.
   “There are going to be some lingering weak players and it will take some time to sort out,” Slangerup said, after meeting shipping clients in Copenhagen, Hamburg and Geneva. “It will be a year or two. A year for some, two for others.”
   Slowing demand in China and Europe combined with a glut of container ships has pushed down freight prices, with  Drewry Maritime Equity Research last month projecting industry losses of $6 billion in 2016. Long Beach is being hurt by the fallout as cargo volumes slumped 22 percent in April after CMA CGM SA shifted some business to neighboring Los Angeles, the busiest U.S. port, following its acquisition of Singapore’s Neptune Orient Lines Ltd.
   “Even though we had a very good first quarter and we had a very good last year, our second quarter will be very weak,” said Slangerup. “We are in the middle of all this musical chairs so volumes are shifting dynamically as we speak.”
   Volumes at the port, which derives more than 90 percent of its business from trade with Asia, should normalize in the third quarter, he said. Cargo increased 6.1 percent in the first quarter, following a 5.4 percent gain in 2015.
   As interest rates and fuel prices rise, mergers and alliances designed to cut costs by sharing ships should proliferate, said Slangerup, a former FedEx Corp. executive.
   An alliance between the world’s two biggest container shipping lines, A.P. Moeller-Maersk A/S of Copenhagen and Mediterranean Shipping Co. of Geneva, represents the “gold standard” for the industry, Slangerup said. In April, CMA CGM signed a preliminary agreement with three other shipping lines to form what could be the second-ranked grouping, the Ocean Alliance.
   The port hopes to serve as a “facilitator of change” to bring together clients in alliances and mergers that will allow them to share not only ships but also information about container freight demand and availability, Slangerup said.
   “Pain is a great teacher,” he said. “It has really begun to bring people together in ways that it hasn’t done in the past.”