Eugen maersk containership

At Least There Won’t Be Financing to Build More Containerships this Year

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April 13, 2012

COPENHAGEN -(Dow Jones)- Danish oil and shipping company A.P. Moller-Maersk A/S‘s (MAERSK-B.KO) container shipping arm Maersk Line won global market share in 2011 and has successfully implemented shipping rate hikes in the first months of 2012, but still expects to make a full-year loss, as it struggles against over-capacity and still unacceptably low rates, Maersk Chairman Michael Pram Rasmussen said Thursday.

Maersk Line, the world’s largest container shipping company, has implemented rate hikes in March and April of $750 and $400, respectively, per standard 20 feet container. Of this, the company has been able to successfully pass on $1000 worth of rate hikes to consumers in total so far, said Pram Rasmussen, speaking at Maersk’s annual general shareholders meeting.

Maersk Line expects to implement further rate hikes in 2012, Pram Rasmussen said, but he also cautioned that with increasing over-capacity there remains a “latent risk of rate declines”.

In 2011, global shipping rates declined an average of 8%. While the container shipping industry sailed deep in the red in 2011, Maersk Line expanded its global market share to 15.5% at the end of 2011, a level Pram Rasmussen described as “satisfactory”.

“We had gotten too far behind in terms of market share, and we succeeded in winning it back in 2011,” Pram Rasmussen said, adding that Maersk Line‘s aggresive growth strategy “with all probability has added to the downwards rate pressure”.

Now, he said, focus has shifted decisively to profitability. “We have now decided that we can’t accept the low rates,” he said. The strict profitability-focus will be maintained until an acceptable return has been restored, he said.

The imbalance between offered tonnage and demand will, however, widen considerably in 2012, where growth in tonnage will rise by an estimated 10%, while demand is seen to expand by merely 5%.

But in the longer term, Pram Rasmussen said, “the supply and demand balance will improve, because the vast losses made by the industry in 2011 means there won’t be financing available to build new ships”.

Maersk Line operates some 630 ships world-wide. About 40% of its revenues are made on the Asia-Europe trade route.

– Flemming Emil Hansen, Copenhagen Bureau, Dow Jones Newswires

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