Soren Skou

Maersk Line CEO: “The Shipping Market Isn’t Sustainable”

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March 5, 2012

Soren SkouLONDON (Dow Jones)–Danish oil and shipping company A.P. Moller-Maersk A/S (MAERSK-B.KO) expects growth on its Asia-Europe container trade route to decline to 3%-4% in 2012, from 11% a year earlier, due to a weakening global economic climate, Maersk Line’s Chief Executive Soren Skou told Dow Jones Newswires Monday.

The company said that it has already cut weekly deployed capacity by 9.5% on the Asia-Europe shipping route, which accounts for 40% of revenues at its Maersk Line container shipping business, and warned the possibility for further capacity cuts remains.

“The current situation in the shipping market isn’t sustainable,” Skou told reporters at a press conference here, referring to the global oversupply of vessels and depressed freight rates.

Last week Maersk said it expects its key container shipping arm to continue to sail at a loss in 2012 as freight rates remain hampered by excess capacity, and said that a tough shipping environment had reduced its fourth quarter net profit by 64% on the year.

Although Maersk Line expects global demand for seaborne containers to increase by between 4%-6% this year, it said that a better supply-demand balance of vessels is essential to protect the shipping industry and to ensure that freight rates will rebound.

“The industry needs to stop ordering container ships. Only if someone actually has the money to buy a vessel, should this be done,” Skou said.

In the worst-case scenario, should market fundamentals fall short of analyst expectations this year, Maersk Line said it was able to reduce its fleet size by a further 9% in order to rein in capacity.

Nevertheless the company said its global market share is anticipated to grow to 16% this year, without citing its share for a year earlier. Maersk said it would offer a better quality service to fend off competitors and if that failed, reduce its rates offered to customers, in order to defend its market position.

-By Neena Rai, Dow Jones Newswires

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