By Nerijus Adomaitis
VILNIUS, Oct 19 (Reuters) - Freight rates in the container shipping industry are recovering gradually and are likely to reach break-even levels by the first quarter of next year, an executive at Denmark's Maersk Line said on Monday.
Maersk Line, the world's biggest container shipper and part of Danish shipping and oil group A.P. Moller-Maersk, was hit hard by the global economic downturn that has sharply reduced world trade volumes. "The rates have been going up now for a while," Vincent Clerc, vice-president for Maersk Line's European business, told Reuters on the sidelines of a European-Asian transport conference in the Lithuanian capital.
"We see them continuing to do so, at least until they are brought back to sustainable levels where the lines can actually finance their cash expenditures," said Clerc, who was appointed head of Maersk Line's Europe product team in July.
Asked when he expected rates to return to sustainable levels, Clerc said: "I think we are seeing it happening between now and the first quarter next year."
Maersk said in connection with its first-half results in August that volumes and rates began to recover in the third quarter but it expected the shipping cycle to lag economic recovery as expansion of the world fleet keeps a lid on rates.
"I think we have seen the beginning of a recovery, but we are not yet (back) at the growth that we have had in the past," Clerc said. "We expect this recovery to continue at a slower pace for the next couple of years, but we think it is here."
SLOW RECOVERY
"We are probably talking about four to five years before we are back where we used to be in terms of trade volumes compared to 2008," he said.
Clerc told the conference that Maersk has seen a 25 percent drop in Asia-Europe trade this year.
"For next year we expect a gradual recovery, we think, in a range of 3 to 5 percent," he said. "We don't see more than that, we expect 2011 to be at the same level." Clerc said that very large container vessels now being ordered by shipping lines would give a significant competitive advantage in trade with China in the future, but would create new infrastructure bottlenecks in Europe.
"In the next four years, even with some expected cancellations along the way, the number of these vessels will increase by seven times," he said.
Clerc said such vessels would pose a great challenge for port terminals and "intermodal operators", which move cargo from one mode of transport to another, such as from ship to rail.
"Because when you have a container dropping 6,000-7,000 containers in one go, it creates a whole new bottleneck inside the terminal and for dispatching on rail so it can reach the end consumers ... and this is something quite fundamental," he said.
Clerc said imports to China were expected to grow to meet domestic demand, while Europe would have to import less but export more, which would also create transport bottlenecks, and require that transport routes be redefined.
"We will see more eastbound flows and less growth in westbound flows," Clerc said. (Reporting by Nerijus Adomaitis; Editing by Rupert Winchester)