"Bleak" Outlook for Container Shipping Is Bad News for the Global Economy

Maersk container ship
Maersk container ship

The world's largest container shipping group, Denmark's A.P. Moeller-Maersk, expects shipping demand on routes between Europe and Asia to be "bleak" in 2013, leading to a very small increase in overall shipping demand of 4% to 5%. While that will weigh down the entire industry, a lack of demand for container shipping often serves as a bellwether for international trade and, to some degree, the global economy.

The main problem for Maersk and other major container shippers is overcapacity, which is driving down rates. The industry solved the problem in 2012 by raising freight rates, but now that Maersk and the others are turning a profit, shippers are unlikely to grant them further rate increases with so much capacity going unused. More likely are demands for cuts in freight rates.

With demand rising at about half the rate that new vessels are adding to capacity, container shippers indeed face a tough year ahead. But the significance of the weak outlook spreads much further and does not augur well for a global economic recovery this year.

Filed under: 24/7 Wall St. Wire, Economy