By Mike Wackett
Maersk Line’s decision last week to lay-up one of its 18,000 TEU flagships is “good news for the industry”, Drewry Maritime Advisors said today. Other ocean carriers are likely to follow the market leader and mothball more surplus ships.
The move to idle the Triple-E vessel followed a profit warning from the Maersk group which lowered its full-year profit forecast for the container division by $600 million to “around $1.6 billion. It blamed freight rates which “significantly deteriorated”, especially on its main Asia-Europe route in the latter part of September and into October.
The dramatic turnaround from the Danish carrier was confirmation that, despite its ability in recent years to outperform it peers in terms of operating margins, it is not immune to the toxic mix of too much capacity chasing dwindling cargo demand. Drewry said Maersk Line’s woes were a “wake up call” for the industry – it might have superior economies of scale, but there is no extra ‘silver bullet’ to protect it from the worsening trading conditions. Without taking steps to mitigate the impact of the downturn, Maersk will bleed like other carriers, said Drewry, adding that it was only four years ago that it posted two consecutive quarterly losses of $600 million.
These losses prompted a radical restructure at Maersk Line and there is speculation that at the group’s third quarter results presentation, there could be announcements of further cuts to services, a cancellation of newbuilding options and, possibly, redundancies. At the profit warning on October 23, Maersk Group Chief Executive Nils Andersen would not comment on possible remedies, but confirmed that the container division’s Chief Executive, Soren Skou, would also be present for the third-quarter results presentation.
Elsewhere in the industry, Q3 results posted so far – the $96 million net loss reported by NOL on Friday and combined $426 million loss from Chinese carriers Cosco and CSCL – illustrate the damage to the carriers’ bottom lines by the sub-economic freight environment. Drewry said: “Carriers have thus far been able to stay in the black, despite rapidly decreasing freight rates, because they have managed to cut costs even harder, but the extent of the pricing decline seen recently will exceed any cost savings and tip many carriers towards the red zone, some quicker than others.”
One possible light at the end of the tunnel for carriers plying the Asia-Europe lanes arrived on Friday when container spot rates within the SCFI reflected the latest round of general rate increases, implemented yesterday, leaping just over $750 per TEU on the week before.
Meanwhile, the industry malaise has seriously dented Hapag-Lloyd’s IPO prospects, obliging the German carrier to discount the price range of its offer and sell additional shares to ensure there will be a full take-up when the extended subscription period ends on November 3.
Reprinted courtesy of The Loadstar (www.loadstar.co.uk)