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Sluggish global growth has eased the world's once-surging demand for Chinese goods this year, and the head of the world's biggest shipping line believes the slowdown suggests more permanent challenges to China's export sector.
In an interview Wednesday, Søren Skou, head of the container-shipping division of Denmark's A.P. Møller Maersk A/S, MAERSK-B.KO +0.60% said the Chinese market is facing fundamental changes. 'It's pretty clear China is losing competitiveness in a number of industries,' he said, adding that China is 'by far the most important market for what we do.' Maersk's customers who ship shoes, toys and other labor-intensive goods are increasingly located in countries like Vietnam and Bangladesh, he added.
Concerning the immediate slowdown, Mr. Skou said his confidence in global trade has deteriorated since June, mostly due to recessionary conditions in Europe, but he said volumes world-wide are likely to expand 4% for the full year compared with 2011, compared with about 7% last year.
Other shipping companies concur. 'We are not seeing as strong as a peak season as we would have hoped for,' said Ken Cambie, chief financial officer of Hong Kong's Orient Overseas (International) Ltd. 0316.HK +0.12% The peak season almost corresponds with summer months.
China Cosco Holdings Co., 601919.SH -0.49% China's largest shipping company by capacity, said Wednesday its first-half loss widened to 4.87 billion yuan (US$766.4 million) from 2.76 billion yuan in the year-earlier period. Revenue increased 1.2% to 34.65 billion yuan.
China Shipping Container Lines Co., 601866.SH -0.91% a leading container-shipping line, said Wednesday its net loss for the first half of this year widened to 1.28 billion yuan, compared with a net loss of 630.3 million yuan in the year-earlier period because of stagnant freight rates. Revenue rose 9.7% to 15.32 billion yuan.
Also Wednesday, Dubai-based DP World, the world's third-biggest ports operator, posted flat first-half profit and revenue, blaming a global economic slowdown due to the stalled recovery in the U.S., the continuing euro-zone crisis and softening growth in China. DP World posted first-half profit of $247 million, compared with $246 million a year earlier. Revenue was $1.53 billion, up from $1.50 billion.
The volume of Chinese exports to the U.S. handled by Maersk is likely to rise 2% this year compared with 2011, Mr. Skou said, while its Europe-to-Asia volumes could slide 3%. He said Maersk expects its world-wide container volumes to gain 6% in 2013, but that prediction hinges on a belief that Europe will rebound from recession.
Maersk said it sees the current slowdown expanding beyond the country's south in the ports of Guangdong and increasingly to the eastern ports around Shanghai, though activity has remained stronger northward. Historically, southern China produces more low-end goods such as footwear and textiles. Jefferies & Co. analyst Boyong Liu said Shanghai has a 'more balanced' export portfolio, which helped stave off a slowdown until recently.
In January-July, container volumes through Shanghai's port increased only 2.7% year-to-year to 18.7 million twenty-foot equivalent units─an industry measure─from 18.2 million units. This is considerably lower than the strong growth that led Shanghai to knock Singapore off the top spot as the world's busiest port.
On Tuesday, operator Shanghai International Port (Group) Co. blamed weak trade volumes due to global economic uncertainty for a 9.6% drop in its first-half net profit. Net profit for the six months ended June 30 fell to 2.25 billion yuan from 2.49 billion yuan a year earlier. Revenue rose 29% to 13.65 billion yuan due to increased revenue from its logistics unit.
Container volumes out of southern China have fared worse. Container traffic through Hong Kong in the January-July period fell 2.6% to 13.7 million twenty-foot equivalent units, as compared with the year-earlier period.
Charles de Trenck of Hong Kong consultancy Transport Trackers said that a slowdown in container-volume growth is close to bottoming out for southern China, but that he anticipates a continued slowdown in the growth from Shanghai port amid current conditions.