“Two sides of the same coin”? “Talking out of both sides of one’s mouth”? You decide.

1. “Business Times – 05 Mar 2010

“AP Moller-Maersk sees return to the black

“(COPENHAGEN) Danish shipping and oil group AP Moller-Maersk said that it would return to a ‘modest’ profit for 2010 after weak global trade knocked freight rates and dragged it to a deeper loss than expected in 2009 …

“‘The main factors driving (results) down of course were low rates in containers and in tankers as well as a significant drop in the oil price – these were really the negatives of last year,’ CEO Nils Andersen told Reuters …

“Mr Andersen said that the most negative effect in 2009 came from the shipping industry’s ‘willingness and capacity to take rates down below cash operating levels’. Looking ahead to the current year, the company said: ‘Overall, the Moller-Maersk Group is expected to post a modest profit. Cash flow from operating activities is expected to be well above the 2009 level.’

“Asked to quantify ‘modest’, Mr Andersen said: ‘We are talking black but probably small numbers.'”

That was one interview. Here’s another:

2. “IFW Online Bulletin

“Container boom just a blip, says Maersk boss – (Fri, 5 Mar 2010)

“Moller-Maersk CEO Nils Andersen … said the sharp increase in volumes was down to shippers rebuilding inventories that had been run down during 2009. As a result, it was unlikely that carriers would re-introduce laid-up ships.

“‘We had a mini-boom in the container business,’ he said. ‘Our customers have told us that this is mainly due to a correction of inventory.’

“‘Last year, inventories came down so far that in many cases replenishment was needed, so it’s probably not an ongoing tendency.’

“Andersen added: ‘The most important thing is that the rates that we see in the market today are still not good enough to justify an expansion of capacity. In general, you do not have the incentive to introduce more ships into the fleet.’

“‘On top of that, we assume the market will not continue at January/December levels, and you need months of security before you take in additional capacity.’

“He expected global container rates would be higher this year than last year, although the supply-demand situation that governed rates remained clear.

“‘We assume that both customers will have an understanding that an industry losing US $ 20-30 bn in a year cannot be expected to uphold satisfactory service.’

“‘So we expect the rate situation to be significantly better than last year, but not good enough to give an acceptable rate of return to the business.’

“If carriers did manage to maintain their discipline, the number of vessels that are laid up would increase, because vessel supply is predicted to grow more than demand, he said.

“‘Looking at 2010, we expect fleet growth of 7-10% but we expect slow steaming to take out a little more capacity next year because slow steaming has grown in popularity.’

“‘And given a demand growth of 3-5%, the number of idle ships will actually increase a little bit.’

“Andersen said that last year operational capacity had increased by less than expected, around 2%, thanks to vessel lay ups and slow-steaming initiatives.”

Moller-Maersk is the world’s largest carrier. Look closely what Maersk’s CEO has just revealed:

1. “Cash flow from operating activities is expected to be well above the 2009 level.” [Sounds good.]

2. “We are talking black but probably small numbers.” [Sounds not so good.]

3. “We had a mini-boom in the container business.” [Sounds good.]

4. “… it’s probably not an ongoing tendency.” [Sounds not so good.]

5. “He expected global container rates would be higher this year than last year …” [Sounds good.]

6. ” … the number of idle ships will actually increase a little bit.” [Sounds not so good.]

If the truth were to be freely admitted, the number of idle ships will increase in the coming months, not just “a little bit”, but in very large numbers. Did anyone, in their wildest fantasies, ever imagine that tumbling economic conditions around the world would require the shipping industry to devise desperate measures such as “lay-ups” and “slow-steaming” in order to survive?

As we said, those too big, too costly and too fast “lay-ups” will never again see service. The only way we’ll avoid the coming depression will be for newly employed U.S. shipbuilders to build thousands of much smaller, much less costly, much slower – but patented – container ships.