Wednesday 26th Oct 2016 - Logistics Manager

Rising container capacity hits profits at Maersk

Maersk’s Liner Business made a loss of $600 million last year compared to a profit of $2.6bn in 2010 as a result of low freight rates on the Asia–Europe trades.

The company said its plan now was to focus on profitability rather than increasing market share.

Freight rates started the year at a reasonable level, but decreased throughout the year as large amounts of new tonnage was delivered. “Overall freight rates were eight per cent lower than in 2010 and this, combined with 35 per cent higher bunker prices, reduced margins considerably,” the group said in its annual results.

“The number of containers carried increased by 11 per cent to 8.1m FFE, and the group more regained the market share lost during 2010.”

Maersk Line is to take 20 new vessels each with18,000 TEU capacity between mid-2013 to mid-2015.

It reckons that the increased size and efficiency of these vessels will result in lower unit costs and the best environmental performance in the industry.

The company said that competition remained tough. “There is continued need for consolidation, reduction of capacity and more stable and sustainable rates. Some operational consolidation was seen at the end of 2011, but Maersk Line maintains its view that more is needed for the industry to deliver sustainable returns to shareholders.”

The aim in the liner shipping market would be to focus on profitability rather than market share, it said. “Maersk Line is satisfied with, and will defend its current market share, which provides sufficient scale benefits allowing for an optimal product offering to its customers. By focusing on profitability over further market share growth, Maersk Line will take a number of initiatives to restore freight rates from the current loss-making levels.

“More specifically, Maersk Line will optimise its pricing practices and adjust its capacity to improve the market balance. Lay-up plans are also activated, super slow-steaming will be used more extensively and Maersk Line will invest in line with market growth.”