MAERSK will cut capacity and service coverage in an attempt to improve profitability in the face of a rising bunker bill, says CEO Soren Skou, reported Fort Lauderdale's Maritime Executive.
"In the short term, we will be closing down some services," Mr Skou told the Wall Street Journal. "Overcapacity is the biggest defect."
To cut back, Maersk will be returning some of its chartered-in fleet to shipowners, reducing its feeder services and channelling volume to direct ports.
"Ocean" business, ocean freight, plus APM Terminals' transshipment [profit] were about US$500 million, dragged down by rising bunker prices and unfavourable exchange rates," Mr Skou said in an investors' call.
Group-wide revenue rose 30 per cent in the first quarter, including the addition of Hamburg Sud, but its underlying loss nearly doubled to $240 million, he said.
Bunker price increases have raised the cost of shipping a single box on an Asia-EU route by $70, he said, yet freight rates on these core lanes remain below breakeven.
Said Maersk Line CCO Vincent Clerc: "It has been difficult to pass on fuel cost increases to customers in contracts, especially also in a short-term market in some areas where we have faced strong capacity injection.
The firm also confirmed that it has no plans to place new shipbuilding orders for at least the next year - unlike MSC, CMA CGM and HMM, which have all been purchasing 22,000-plus TEU mega ships for their fleets.
Mr Skou also warned the re-imposition of sanctions on Iran, or the prospect of a trade war between the US and China, could make the situation worse.
"We have to admit that the Americans have taken a number of initiatives recently that have caught us by surprise," he told Reuters. "With the sanctions the Americans are to impose, you can't do business in Iran if you also have business in the US, and we have that on a large scale."
Maersk is already pulling back from Iran, as is Maersk Tankers, which is no longer part of Maersk Group. The risk posed by new sanctions on Iran extends beyond its direct impact on trade: it is also pushing up oil futures, Mr Skou said, driving the cost of bunkers higher.
Source : HKSG.