Miles sounds caution over potential industry downturn

Miles sounds caution over potential industry downturn    Ray Miles, the high-profile chairman of CP Ships, told investment analysts Monday the current bull run of the liner shipping industry could end in 2006 if demand weakens.
   Industry forecasts show “a big gap” between expected supply and demand in 2006, he said. Ship capacity in 2006 is forecast to climb about 14 percent, whereas traffic growth is predicted to be about 8 percent in the same year, according to independent forecasts cited by CP Ships.
   “It’s difficult to call,” he told investment analysts. “Our view is that 2006 is probably going to be the first challenging year for the industry.”
   Ship operators and owners have ordered a record amount of new containership capacity. Orders represent about 45 percent of the existing containership fleet, with deliveries spread over the next four years.
   CP Ships reported that shipyards have virtually full order books up to the end of 2007. “Already, it’s difficult to get full orders for ships with delivery in 2007,” Miles said. Orders for new containerships now have to be “rolled into 2008.”
   Miles said analysts expect the strong market in container shipping to continue at least until the end of 2005. Growth in supply in 2005 is expected to be about 12 percent, marginally higher than the predicted increase in demand.
   Prospects for 2006 are seen as less certain, although Miles said many analysts are now confident about industry prospects for the year 2006.
   With high expected annual increases in ship capacity, Miles suggested that the fortunes of the container shipping market will depend largely on whether demand will remain strong.
   “Any faltering of demand ' is likely to trigger the next industry downturn,” he said.
   Miles added there is no indication that demand will weaken in the short term, as strong demand is outweighing increases in supply. This situation is “exacerbated by supply constraints with respect to congestion in different places around the world,” Miles noted.
   “We’ve been around for a very long time,” Miles said, referring to the management team of CP Ships. “We don’t believe that the cyclical boom is going to continue for ever.”