Galloping Consumption

According to Reuters, Nils Smedegaard Andersen, CEO of A.P. Moller-Maersk, stated at the New Year’s gathering of the Danish Society of Financial Analysts that, “There is no doubt that we stand before a period of long-term growth.”

Prospects for population growth in developing countries whose people are becoming wealthier and want to consume things will create plenty of work, Mr. Andersen said. “We should get used to a world where there will be colossal volatility both in the short and long run, with dramatic upturns and downturns,” he said. “But long-term growth we think is a given”.

China’s work force and those of other companies in Asia with even lower wage scales means that outsourcing of production will continue as long as the large cost gaps exists, Mr. Andersen stated, and he added that factories in those countries were likely to get even larger, with more and more of what is produced being transported by companies like Maersk. –

This man is either hallucinating or dissembling. According to Drewry’s latest quarterly Container Forecast, freight rates on major east-west loops are projected to shrink seven percent in 2011.

“Unfortunately, the desire to maintain market share seems to be the primary driver in the east-west trades at the moment since carriers have resolutely refused to take out capacity from the marketplace despite the fact that headhaul utilisation factors were in the low 80s (mid-December) and spot rates were falling steadily, week by week,” said the report’s editor Neil Dekker.

Drewry said the profitability of carriers will contract to about $ 8 billion compared to an estimated $ 17 billion in profits last year, and warned that “this could be considerably lower if carriers’ pricing and capacity discipline weakens further.”

Drewry also forecast the global fleet will increase 8.5 percent this year because many larger 8,000-TEU containerships will be delivered. The cargo growth is estimated to rise only 7.4 percent, however, and because leading carriers have started to order new vessels, the overcapacity problem is likely to become worse in the near future.

And by the way, Mr. Andersen, the World Bank warned on Wednesday that, because of slowing growth and rising commodity prices, 2011 is expected to be a year of deceleration for the global economy – not a period of long-term growth. According to the 187-nation institution, threats that could derail the economy include the eurozone financial-market crisis, volatile capital flows and the rising prices of commodities, including food and fuel.

“Outsourcing of production will continue,” predicts Maersk’s CEO, with more and more of what is produced being transported … to whom, Mr. Andersen? The U.S. is – or was – the world’s biggest market, but the number of unemployed here now exceed Great Depression numbers, and increasing joblessness (and outsourcing) can’t possibly lead to your fantasized “period of long-term growth”.