Singapore’s Neptune Orient Lines (NOL) (NEPS.SI), the world’s seventh largest container shipping firm, will order more vessels to address an expected shortage in the global freight market within a few years, its chief executive said.

The remarks come three days after A.P. Moller-Maersk (MAERSKb.CO), the world’s biggest container shipping firm, said it placed a US$1.9 billion ($2.44 billion) order with Daewoo Shipbuilding & Marine Engineering (042660.KS) to build 10 of the world’s largest container ships for delivery between 2013 and 2015.

Chief Executive Ronald Widdows, however, did not say how many more ships he would order above the 10 vessels announced last year for delivery in 2013-2014.

NOL, which operates 145 ships with a total capacity of 585,000 twenty-foot equivalent units (TEU) of container boxes, has total cash of US$977 million on hand as of 2010-end.

 

Widdows said 2011 would be a “normal year” where supply and demand for container ships would both grow by around 6%.

 

The global shipping industry has rebounded strongly from the worst downturn in history in 2009 as the recession hit global trade and forced many companies to lay up ships and cut jobs.

 

The industry, seen as a key indicator of global economic activity, however, would face a shortage of ships in the coming years due to surging demand, especially in Asia.

 

“Look at the order book, the size of the ships that are coming in 2013 and 2014, there are not many ships. There better be some more ordering of ships because there is not enough tonnage to meet the demand,” Widdows said in an interview at NOL’s headquarters in Singapore on Thursday.

 

The CEO said he does not expect Maersk’s order for ten mammoth 18,000 TEU container ships to have any significant impact on its operations or the broader industry.

 

“It has no play or influence on the dynamics that affect the business anytime soon,” Widdows said.

 

“Their market share in Asia-Europe (routes) is very large, multiples of many other companies. It doesn’t really apply to most others in the industry,” he added.

   

NOL planned to turn over many of its ships under charter within the next two to three years. 

 

“Because we didn’t order many ships in the last decade, we have a lot of charters and a lot of those come due in the next few years,” Widdows said.

 

“It makes sense to continue to purchase ships. Not a lot more, but more. I need the capacity,” he added.

 

Last year, NOL placed a US$1.2 billion order for 10 vessels with 8,400 TEU capacity to be delivered in 2013 and 2014 and signed a letter of intent for two 10,700-TEU vessels.

 

NOL reported a better-than-expected fourth quarter profit of US$177 million last week, but warned that the outlook of the

industry is uncertain. 

 

Widdows said intra-Asia routes have been taking a lot of capacity from other sectors as trades between China and other countries in the region have sharply increased over the past few years.

 

The volume of NOL’s intra-Asia cargoes accounted for 40% of its total capacity last year, compared with just 26% in 2003.

 

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During Friday’s budget speech, Finance Minister Tharman Shanmugaratnam said the government would help promote further growth for the country’s maritime sector.

As part of its 2011 budget, the Singapore government has introduced the Maritime Sector Incentive scheme, effective from June.

Martime has lifted its contribution to gross domestic product from 5% to over 7.5% in the last year.

“New tax benefits such as certainty of withholding tax exemption for interest payments on loans to build or buy ships will also be introduced to further entrench international ship operators and encourage the growth of the shipping-related services sector in Singapore,” he said.

He also vowed to expand the scope of GST zero-rating for repair and maintenance services performed on ship parts and components. This will take effect in June.

Singapore’s ambitions to become Asia’s main shipbroking hub were helped last February, when its 2010 budget included a reduced 10% concessionary corporate tax rate for companies dealing solely in shipbroking and freight derivatives trading.

Shayne Heffernan Strong Buy Neptune Orient Lines reported a net profit of US$177 million in the fourth quarter, as the companys container shipping line continued to attract better freight rates and volumes.

This reversed a US$211 million loss in the same period a year ago.

Neptune the world’s 7th largest container shipping line also reported a full year net profit of US$461 million, overturning a US$741 million loss in 2009.

Full year total revenue rose to a record high US$9.4 billion, a 45 per cent increase from the year before.

The results complete a dramatic turnaround for the shipping line last year from the global recession.

‘Strong demand from shippers and rate increases in our major trade lanes helped drive the turnaround,’ said chief executive Ron Widdows.

Shayne Heffernan has affirmed his strong buy on Neptune Orient Lines Ltd. SIN:N03 as Singapore container traffic grew 10 per cent in 2010 from the previous year.

Throughput for 2010 was 28.4 million TEUs (twenty-foot equivalent units), according to advance estimates shared by Singapore’s Minister of Transport Raymond Lim at the Singapore Maritime Foundation’s New Year Cocktail reception on Thursday.

Recent reports out of China suggested that this would move Singapore off the top spot as the world’s biggest container port.

According to the reports which cited unnamed city officials, Shanghai handled 29.05 million standard containers in 2010, edging past Singapore.

But as cargo volumes pick up and container freight rates stabalise, the outlook for port activities in Singapore is bright.

“As a major transhipment hub, we are well positioned to capitalise on the growth momentum in Asia. Singapore also remains the world’s top bunkering port. Our total bunker sale in 2010 reached a new record high of 40.9 million tonnes. This is an increase of 12.3 per cent from last year,” said Mr Lim.

Neptune Orient Lines (N03.SG) is off 2.3% at $2.12 with 10.6 million shares traded, continuing its volatile run over the past couple of weeks in heightened volume.

Citing the stock’s rebound from its $2.09-$2.10 low last week, AmFraser technical analyst Najeeb Jarhom notes the potential for frequent quick recoveries, which attract “traders on weakness around the key S$2.03-S$2.10 support band,” while NOL’s almost continuous recovery after April-May’s steep 25.5% correction from $2.35 to $1.75 “has endeared it to traders who would pounce on any short-term trading chance.” 

He notes confidence the stock won’t deviate much from $2.10 is likely due to the minimum monthly high of $2.08-$2.18 for the past year, especially after the $1.75 May bottom. 

 

“Although it is early days yet to call $2.09 the floor this time, fairly reliable bounces back to the $2.20-$2.30 higher band can continue to be expected even if the stock comes under pressure again.” 

 

Below $2.09-$2.11, he tips $2.03-$2.05 Fibonacci support. 

 

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Neptune Orient Lines, Asia’s second-biggest container line, posted a better-than-estimated fourth-quarter profit as rebounding global trade boosted rates and volumes.

 

Net income was US$177 million ($227.1 million) in the three months ended Dec. 31 compared with a loss of US$211 million a year earlier, the Singapore-based company said today in a stock exchange statement. The shipping line was expected to post a US$75 million profit based on the average of four analyst estimates compiled by Bloomberg. Sales rose 37% to US$2.8 billion.

 

The company’s container volumes grew 13% as economic recoveries in the U.S. and Europe drove up demand for furniture, clothes and electronics made in Asia. The shipping line and larger rival Evergreen Group also ordered new vessels last year as demand rebounded following the end of the global recession.

 

“Volumes have held up better than earlier expected amid growing demand from major economies,” said Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul. “The shipping lines also have become more prudent in managing capacity.”

 

Neptune Orient’s APL unit carried 829,000 40-foot equivalent containers in the fourth quarter, according to the statement. Average revenue per box climbed 24% to US$2,757. The unit’s sales rose 40% to US$2.4 billion.

 

Demand growth may slow this year after a post-recession surge in 2010, Chief Executive Officer Ron Widdows told reporters in Singapore. Shipping lines may able to slow more vessels to curb capacity amid the weaker growth and to offset rising fuel prices, he said.

 

“There will be some moderation in growth in overall trade,” Widdows said. Global container trade may expand 9.7% this year, after jumping 13.5% in 2010, according to Clarkson Plc, the world’s biggest shipbroker.

 

NOL, controlled by state-investment fund Temasek Holdings, gained 1% to close at $2.13 in Singapore today before the earnings announcement. The company has risen 29% in the past 12 months, compared with a 12% gain for the city-state’s benchmark Straits Times Index.

 

The shipping line has the capacity it needs for this year and it isn’t due to receive any new vessels in the period, Widdows said.

 

The company is scheduled to accept 10 ships next year, 10 in 2013 and two in 2014. It placed orders for 12 ships valued at about US$1.2 billion last year.