[250618.EN.SEA] Maersk Line Axes Services to Boost Parent Group's Profits

DENMARK's Maersk Line is overhauling its service network in an effort to generate higher earnings, after the latest quarterly results showed that A P Moller-Maersk suffered a loss of US$239 million.

Group CEO Soren Skou singled out Maersk Line for specific criticism, lashing the carrier for delivering "unsatisfactory" results. At last month's results announcement, Mr Skou said steps were being taken to bolster performance. These measures now include the scrapping of a number of unprofitable routes.

Maersk is not alone in struggling in the first months of this year with the majority of its peers also reporting losses on the back of weak freight rates and higher bunker and charter costs, reported Singapore's Splash 247.

"Carriers are fully aware that spot rates are under pressure this year and overall they have not secured meaningful increases on the key east-west lanes for BCO (beneficial cargo owner) contacted cargo," ClipperMaritime container consultant Neil Dekker said.

"It seems that some lines are looking at their portfolio of services to determine where it is now profitable to run a service and any that are not will be up for serious scrutiny."

Maersk along with MSC have both axed a service on the Asia to Middle East/Red Sea route - their Horn of Africa and Petra services respectively.

Spot rates into Jebel Ali have been below US$500 per TEU for most of the year and are on average 30 per cent below the levels recorded in the first half of 2017, ClipperMaritime data shows.

In addition, the AC5 loop previously launched on the Asia to west coast South America (WCSA) trade this April has been suspended. Maersk is now taking slots on competitor loops.

"This is a strategic shift with operators deploying tonnage in the markets that make money, although this will cut options for shippers on certain port pairs as carriers decide whether they want to be a vessel deployer or slot charterer," Mr Dekker commented.

It is understood that the re-launch of services on the Asia-WCSA trade in April caused spot rates to drop from an average of $2,000 per TEU to $500 per TEU in a matter of weeks and so their removal will help restore the supply/demand balance.

Source : HKSG.