Friday, May 6, 2016

MAERSK EXPECTS BUSINESS INCREASE

Maersk Line CEO expects business to pick up later this year

Søren Skou, chief executive officer of the world's largest container carrier, predicts the industry will see upward price momentum in the second quarter this year ahead of the traditional peak shipping season in the third quarter.

   The world's largest ocean carrier by volume expects the container business to improve later this year.
   “We expect the market to pick up towards the third quarter of 2016,” Maersk Line Chief Executive Officer Søren Skou said in the company's latest earnings statement. "Our network is now operating with very high utilization and our vessels are full in the Asia-Europe trade. In this quarter, we expect some upward price momentum ahead of the traditional peak in the third quarter.”
   Maersk also said an “organizational transformation” and and cost cutting initiative announced last November is “progressing as planned.”
   The company said last November that it would cut staff by 17 percent, eliminating about 4,000 of 23,000 positions.
   Maersk said “capacity reductions made in the last half of 2015 are also paying off."
   "Maersk Line has increased utilization, especially on its services from Asia to Europe," it added. "Utiliztion on the trade is expected to remain high. However, rates on the trade are unsustainable, why Maersk Line will continue to work on improving profitability.”
   Maersk Line’s first quarter profit amounted to just $37 million about 95 percent lower than the $714 million it made in the first quarter of 2015.
   It said the first quarter in 2016 was characterized by a continuation of the global rate war in container shipping, driven by weak demand and significant supply growth. Global container shipping demand growth stood at about 1 percent, a small fraction of the global container fleet capacity growth of more than 7 percent.
   “Consequently, the market conditions continue to be very challenging,” the company said, with Maersk’s average rate decreasing by 25.5 percent o a record low of $1,857 per 40-foot containers.
   “We improved our financial performance compared to the fourth quarter in 2015 despite continued drop in prices. However, our first quarter result is not satisfactory, though as expected,” said Skou.
   "In a market with record low freight rates, we won market share, drove down cost and continued to deliver positive free cash flow, enabling us to fund our own growth," he added.
   Maersk Line announced three new services during the quarter -- SeaLand’s Atlantico service, Maersk Line’s transpacific TP18 service, and a new Irish Sea service by Seago Line, its European short sea operation.