Maersk CEO says container rates back in the black

Monday, 18 June 2012 00:00 - - {{hitsCtrl.values.hits}}

COPENHAGEN (Reuters): Container shipping freight rates are profitable again and could rise further if trade picks up over the summer, the head of A.P. Moller-Maersk, the Danish shipping and oil group, said last week.

The recovery in rates could signal a brighter outlook for the global shipping industry, which has struggled to emerge from a four-year slump caused by oversupply of vessels and weak demand due to the sluggish world economy.

“At the moment, freight rates are at a level where container transport is earning money,” Chief Executive Nils Smedegaard Andersen said in a presentation to the Danish Society of Financial Analysts.

“We are still working to get higher rates,” Andersen said. “We hope there will be a pick-up in world trade after the summer.”

Last month, Andersen had said recent rate increases meant most container shipping lines were probably operating at breakeven levels. This contrasts with last year when rates plunged towards the middle of the year, which took A.P. Moller-Maersk’s Maersk Line into the red for the year.

Results this year for Maersk Line, the world’s biggest container shipping group and a barometre of world trade, are expected to stay negative or “up to neutral,” assuming that a rate recovery since March continues, the group has said.

Andersen said last month in the company’s first-quarter results presentation that he hoped Maersk Line would get into positive territory this year, but that would require higher freight rates.

But he said on Thursday that the oversupply of ships weighing down the industry would persist for several more years.

“We think there will be overcapacity in container shipping until 2016-17,” he said.

Andersen said Maersk Line had the fleet capacity it needed to maintain its market share and did not plan to buy more vessels. Maersk Line has said its global container shipping market share was 15.5 percent in 2011 and it had 17.8 percent of the market on Asia-Europe routes. “With the capacity we have, we are well equipped for the next years,” Andersen said. At some point, we will go out and order containers, but we have no plans to go out and buy ships.” “We have roughly the ship capacity that’s needed to maintain our market share in the next five years,” he said.

Andersen said he expected the group’s oil rig arm, Maersk Drilling, to grow considerably in the years to come.

“We see strong interest from big oil companies to work with us,” he said, pointing to recent contracts for the company.

“Maersk Drilling will be a considerably bigger business than it is at the moment,” he said.