Shipping firms are operating in an unsustainable economic environment with prospects unlikely to improve much in 2012 due to high fuel prices, low freight rates and slowing demand, said the head of the world's sixth largest container firm.

The container freight market has been struggling with an overcapacity of ships and may be forced to consolidate further, said Kenneth Glenn, president of APL Co. Pte. Ltd., the shipping unit of Neptune Orient Lines.

"Clearly the (industry) losses that you see now and that you are likely to see in the fourth quarter are not sustainable over the long term," APL's Glenn told the Reuters Manufacturing and Transportation Summit on Monday.

"To some degree, that will result in actions that could change the playing field and could change the level of the competitive environment."

NOL, Maersk Line, CMA CGM and many other shipping firms, reported losses in the third quarter due to the difficult market.

Glenn, however, did not expect a repeat of the severe downturn in 2009, when a collapse in trade cost the industry an estimated $19.5 billion.

As for APL, Glenn said he sees high-single digit volume growth next year after taking into account the adjustment in its capacity.

Although the industry is facing a relatively bleak global economy, there are bright spots in some sectors such as trade from the rest of the world into Asian and Middle East routes.

Glenn said trades bound for Asia "are going at a very healthy rate and they are very important in the overall profitability picture", helped by strong regional currencies and consumptions.

Focus on Organic Growth

APL said it was focusing on "organic growth" and strategically implementing one of the industry's largest orderbooks with 32 container vessels, due to be delivered by 2013.

The company has warned it could report a full year loss for 2011.

"We have a $4 billion orderbook and that's going to satisfy our appetite for some time," Glenn said. "We have a huge challenge ahead of us in terms of deploying those assets in a difficult market."

Glenn repeated that the company was not making a bid for German rival Hapag-Lloyd AG, the world's fifth largest container shipping firm measured by capacity.

NOL decided in 2008 to end acquisition talks with Hapag after failing to agree on a price for the German company, which is owned by a consortium of Hamburg-based investors and tourism group TUI. (Reuters)