From SCDigest's On-Target e-Magazine
Feb. 29, 2012
Global Logistics News: Following Events at Maersk can Say a Lot about the State of the Container Shipping Industry
Post Big Loss for Year, Cancels Option for Next 10 Triple E Megaships; Loss on Each Container, but Making it Up on Volume?
SCDigest Editorial Staff
There has been a steady stream of news of late from ocean container shipping giant Maersk Line, which in total says a whole lot about where the industry stands right now - a position that isn't a very good one, for carriers at least.
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Maersk also said it will increase its level of "super slow steaming" to reduce operating costs of its vessels by reducing fuel usage.
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Maersk Line, a division of A.P. Moller-Maersk, said this week that is lost $602 million in 2011, after record profits of $2.6 billion on 2010.
That even though the company said it saw cargo volume gains of 11%, handily above estimates for overall tonnage growth globally of 7%. Maersk also saw its revenues grow 5% to just over $25 billion.
But those market share and revenue gains came at a great price, as the company bid below costs for market share and continued plans for growing overall capacity. Amid a punishing industry capacity glut, rates slipped on average 8%, including bunker fuel surcharge, to $2,828 per 40-foot container from $3,064 in 2010. That as those bunker fuel costs rose about 35% during the year.
The result: the big loss. The losses occurred in the second half of the year, with a Q4 loss of $633 million, following a loss of $297 million in Q3. The first half of year had been modestly profitable.
In the end, Maerk said lost $75 on each 40-foot container shipped in 2011 compared with a $384 profit per container in 2010. Reminds of the old joke about "we lose money on every unit but we'll make it up on volume."
The company said conditions were worst in Asia to Europe routes, where rates decline 19%; in Asia to North America routes, volumes were up just 2% while rates fell 7%.
Maersk says it expects the losses to continue in 2012.
Cancels Next Round of Triple E's
The previous week, Maersk had announced it was cancelling its option to buy another 10 of the giant Triple E container ships that it could have ordered from Korean shipbuilder Daewoo, a move not unexpected given the continued glut of ocean shipping capacity referenced above.
(Global Supply Chain Article Continued Below)
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