Drewry consultants see 2011 container ship profits falling

• Sees 2011 industry profits at $8 bln vs $17 bln in 2010
• Market share fight could knock profits below forecast
• Global container fleet to grow 8.5 pct in 2011

COPENHAGEN (Reuters) - A fight for market share between container shipping lines is denting rates and profits, and a lack of capacity discipline could knock earnings below current estimates, shipping consultants Drewry said.

The global shipping industry rebounded in 2010 from a dismal year in 2009 when the economic crisis hit trade, cargo volumes and freight rates.

But Drewry sees container shippers’ collective profits dropping to around $8 billion this year from an estimated $17 billion in 2010, still a rebound from losses of $19.5 billion in 2009, it said in a Jan. 11 glimpse of its new Container Forecaster analysis.

“This (2011 profitability) could be considerably lower if carriers’ pricing and capacity discipline weakens further,” Drewry said in a statement.

Maersk Line, owned by Danish shipping and oil group A.P. Moller-Maersk, is the world’s biggest container shipper.

Major rivals include privately owned Switzerland-based Mediterranean Shipping Company, French privately held CMA-CGM, China’s COSCO, Korea’s Hanjin Shipping, Taiwan’s Evergreen Marine  and others.

Freight rates have come off peaks seen around August 2010, which will pull earnings back towards more normal levels this year from last year’s strong results, London-based Drewry said.

“2009 was a horrendous year for the industry when a couple of carriers should have gone under but didn’t,” Neil Dekker, editor of Drewry’s container forecast, told Reuters on Tuesday.

“The rebound in 2010 was surprisingly strong -- I don’t think anyone foresaw the demand rebound in the early part of the year -- and because of carriers’ discipline on the supply side, they got a lot of rate increases through and did extremely well,” Dekker said.

But capacity discipline has weakened. Towards the end of 2010 carriers did not withdraw capacity from the market which could have helped them bolster rates, he said.

“If you look at Asia-Europe (trade), the net result is that most carriers tried for a general rate increase on January 1, and that has pretty much failed and existing rates have been extended into January,” Dekker said.

He said that the forecast 2011 earnings drop was “fairly significant,” but added: “In the grand scheme of things, we would project that operating profit margins for carriers would be around 5-6 percent and that is historically about average.”