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Delayed Chilean factory hits MCI in 2014

According to plan, Maersk's container producer MCI was supposed to open a new factory in Chile in 2014, and this missed deadline affects the result for last year. The factory will definitely open this year, says CCO Søren Leth Johansen, who has great expectations for the venture.

MCI's containerfabrik Qingdao.

The deadline is long overdue for the launch of Maersk Container Industry's new reefer factory in Chile. The ribbon was originally set to be cut in May last year. Then the launch was postponed till after the summer, and this deadline was also missed.

The factory, the third in MCI's portfolio, is currently in the midst of test production, but CCO Søren Leth Johansen declines to name a specific launch date:

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"But it will definite be in 2015," he tells ShippingWatch, adding:

"From the decision was made and until the project is up and running, there were developments underway both in terms of production and safety, which were better, and we wanted to implement these."

15 percent more expensive

This concerns robotic machines for painting the new containers as well as the factory's safety equipment, which MCI decided to upgrade. An upgrade that has also made the factory more expensive than the original USD 170 million budget.

"It's become 15 percent more expensive. We opted to do it the right way from the beginning. Market demand was at a level where we felt that there was no rush to finish the factory, so we'd rather do it right from the beginning," says Søren Leth Johansen.

He does not believe that MCI missed out on potential orders by exceeding the original deadline. The customers contacting the company have had their orders produced at the factory in China. But he agrees that the company has likely postponed orders from potential new customers.

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"But when we do open in Chile they'll still be very tempted," he says, adding:

"We have high expectations for our Chile location, which will bring us closer to our customers. Having a reefer factory in Chile gives us a greater proximity to the shippers. This will help strengthen our product development, as we can talk to them about the challenges they face. When we speak to carriers we focus a lot of operational aspects, while shippers will point to other matters."

Big impact on the bottom line

The market for reefer containers has taken a bit hit from the crisis in the industry and carriers' lack of investments in new containers. For MCI this development resulted in a USD 9.4 million deficit in 2013, from a profit the year before, and factors such as the missed deadline on the Chile factory in 2014 will have a negative impact on the company's bottom line.

"We've been suffering in the first three quarters, it hasn't been a great for MCI and the market in general. We've allocated resources to the Chile factory and we won't finish 2014 with a positive result, but we're still optimistic," he says.

Søren Leth Johansen points out that demand for reefer containers grew more last year than in previous years, and MCI thus expects a 4-5 percent growth in demand for reefer transports in 2015.

When the factory in Chile is up and running, the company expects an annual production of 40,000 containers.

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