Maersk chief says no doubt about long-term growth

Monday, 17 January 2011 00:01 -     - {{hitsCtrl.values.hits}}

  • A.P. Moller-Maersk CEO says long-term growth is certain
  • Says growth will continue despite “colossal volatility”
  • Population and income trends underpin trade and transport

COPENHAGEN (Reuters) - Increasing population and incomes in developing countries and a tendency for world trade to expand faster than GDP point to long-term growth in the transport business, the head of Danish shipping and oil group A.P. Moller-Maersk said.

“In our world, there is no doubt that we stand before a period of long-term growth,” Maersk group Chief Executive Nils Smedegaard Andersen told a gathering of financial analysts on Wednesday evening.

Maersk Line is the world’s biggest container shipping company and is sometimes seen as a barometer of global trade.

“Traditionally, we have seen container transport grow 2-3.5 times faster than development in global GDP,” Andersen said.

Prospects for population growth in developing countries whose people are becoming wealthier and want to consume things like people in Europe and North America will create plenty of work for a group like Maersk even though there will be bumps in the road, Andersen said.

“We should get used to a world where there will be colossal volatility both in the short and long run, with dramatic upturns and downturns,” he said at the annual New Year’s dinner of the Danish Society of Financial Analysts.

“But long-term growth -- that we think is entirely given,” Andersen said.

China’s huge workforce as well as those of Asian countries with even lower wage costs than China suggest that outsourcing and offshoring of work will continue as long as the large cost gap exists, Andersen said.

He said factories were likely to continue getting larger, meaning that more and more components would be transported around the globe before products are assembled, so container transport would continue growing faster than the world economy.

“We are a company that has invested heavily in growth,” Andersen said. “We have invested about 200 billion crowns ($35 billion) over the past five years. That corresponds to about 200 million crowns per work day.”

Despite that big investment programme, A.P. Moller-Maersk had a cash flow from operations of $7.4 billion in the first nine months of 2010, Andersen noted.

“One does not need to be a great mathematician to calculate that it will be about $10 billion for the year,” Andersen said.

Maersk launches weekly CRX to boost EU-Mexico trade

The trade between Europe and Mexico gets a boost as Maersk Line launches CRX, a weekly service connecting these two geographies. The service is not calling any US port to ease exporters’ customs work and save their valuable time.  The service that will connect Tilbury, Rotterdam and Bremerhaven in Europe with Veracruz and Altamira in Mexico is the fastest on this route. It takes only 14 days for the cargo loaded at the Bremerhaven to reach Veracruz. This will help European exporters of paper, chemicals or automotive products reach their Mexican destinations faster. Moreover, Maersk Line is offering the widest acceptance for Out of Gauge cargo, which will help the exporters of heavy machinery, trucks and buses.  

The service will also help fresh fruits exporters from Mexico who plan to transport limes, mangoes and avocados to Europe. These fruits are transport sensitive commodity and require special storage conditions while at sea. Maersk Line is deploying StarCare, the controlled atmosphere container, on this service. This will help to protect the quality of fruits such as avocados for longer shipping and storage periods. The fruits once loaded at Altamira in Mexico will reach Rotterdam in Europe in 20 days.

”Over the past several years many of our customers have expressed their interest in Maersk Line being able to offer a service connecting the Mexican Gulf to the world,” said Erik Bo Hansen, Managing Director for Middle America Cluster at Maersk Line.

 “These same customers - and more - are very appreciative of the new very competitive product linking Veracruz and Altamira to Europe. They see this as plugging a major hole in Maersk Line’s service portfolio while offering increased options in this important and growing trade,” he said.

Veracruz and Altamira account for more than 35% of the total Mexican containerized transport market.

CRX is a service intended to support the growth of this trade between Mexico and Europe on a sustainable basis.

“We see good business development in Mexico; consumption is also growing so both, partners and consumers have increased their demand,” said Eivind Kolding, chief executive officer, Maersk Line. ”Some analysts are forecasting an increase in trade between Europe and Mexico close to 15% for 2011”, he said.