ShippingWatch

Maersk Line prepared to shut down services

Maersk Line wants to increase container fleet utilization after the surprising decline in the first quarter. The carrier points to several of the trades that could be affected in an interview with ShippingWatch.

On the one hand, Maersk Line's first quarter report, released Wednesday, was surprisingly positive and the best ever in regards to how the carrier performed within a three-month period.

On the other hand, the report showed that the carrier has not been able to fill the vessels - and this will now have consequences, CFO Jakob Stausholm tells ShippingWatch.

"We have different tools in the toolbox that we need to use. One of them is that we will withdraw capacity where it's needed. This could concern services in Asia-Mediterranean and West Africa," he says.

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What has surprised Maersk Line and most likely others in the global container industry is the lower growth in the demand for containers, which landed at 1.8 percent in the first quarter. In this aspect, countries such as Nigeria and Angola have been severely impacted by the low oil price, which has affected growth in the two countries that were otherwise among the financial growth engines in Africa.

Lower growth in countries such as Brazil, Russia and China also contributed to the container market slowing down. And seeing that growth in Europe is not exactly booming, expectations for global prosperity are somewhat subdued.

"We will react"

"The global economy grew less than we had thought. This has affected the utilization of the vessels and we must react to this. We won't know for another few months whether this has had an effect on our market share, but there is no doubt that we will do what it takes to defend our ambition of growing with the market," says Jakob Stausholm.

He adds that the first quarter is usually the toughest of the year and can change substantially due to the Chinese New Year, for example, and for this reason he expects that the carrier will be able to bring its utilization back up. At the same time, the strike on the US West Coast also affected the market in the first months of the year.

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The low oil price in the oil producing countries is making the growth totter. In the case of Russia, both the oil price and the sanctions following the Ukraine crisis have affected the market, and according to Jakob Stausholm, the decline in Russia can be felt in the entire Baltic region. He cannot put exact numbers on the amount in question, but only say that it is "big".

The benefit of 2M

Improved fleet utilization also represents a significant part of the motivation for Maersk Line's alliance with MSC - 2M - which was launched after the turn of the year and which the carriers believe was finally implemented in April. For this reason, the expectation is that now the benefits can really be collected, says Jakob Stausholm.

"It is a big step that this giant alliance has been finalized. Generally, things have gone really well getting everything settled in spite of a few startup problems along the way. The way things look right now, there is nothing to indicate that the premises we planned for 2M should not hold true," he says.

Maersk Line expects gains from the alliance of about USD 53 million a year. And this is seemingly coming true, although the carrier cannot make any precise statements yet on how the customers have reacted to the alliance.

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Maersk Line achieved a profit in the first quarter 2015 of USD 714 million compared to a plus in the first quarter 2014 of USD 454 million.

Regarding the exploitation of fleet capacity, the carrier wrote in the report:

"Maersk Line volumes decreased by 1.6 percent in Q1 2015 underlining challenging market conditions and a less than satisfactory development in volumes and vessel utilization. Maersk Line's strategy remains to grow with the market and also to ensure satisfactory vessel utilization."

Within the next few weeks, Maersk Line will announce an order for new, large container vessels.

Clarksons Platou: Is Maersk Line losing the battle?

Maersk Line delivered USD 714 profit in Q1

Media: Maersk close to ordering giant vessels in Korea

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