Maersk Line’s old direction could have been costly

Claus Wiinblad from the Danish pension fund, Danish Labor Market Supplementary Pension, recently expressed his satisfaction that Maersk Line is no longer focusing solely on expanding its market share and pushing competitors out, as was the case in the first half of 2011.

“In the fall, the company’s rhetoric focused on tough competition as a means to force through a consolidation. Now we have witnessed a significant effort to raise rates. Whether this signals a change in strategy remains an open question,” says Claus Wiinblad and adds:

“However, as shareholders we are very pleased with the new direction. Had the company continued to adhere to its previous direction, it could have become a very costly affair.”

In 2011, Maersk Line lost $600 million due to extremely low freight rates caused by fierce competition and excess capacity, specifically on the route between Asia and Europe. Yet in 2012, Maersk Line has projected and raised rates, which has changed the company’s situation.

“It is not a change of strategy, but we were too far behind in the market share. We have fought and that has affected rates. Consequently, we have decided that the loss of 2011 was unacceptable and so we raised the rates,” says Michael Pram Rasmussen and continues:

“Of the total 1150 dollars projected per twenty-foot-container, we have gotten about 1000 dollars through, and that is a fairly good result. Of course, the rates cannot stay at the current level if supply remains the same. We expect a capacity expansion within the industry of 10 percent as well as a volume growth of 5 percent, but decreasing rates remain a latent risk.”

As a result, the company is working to keep capacity down and rates up in 2012, says Michael Pram Rasmussen.  

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