Heeding the words of its group CEO, Maersk Line, the world’s largest containerline, is making sweeping changes to its service network in a bid to drive profitability at a difficult time for the Danish carrier.
In the group’s latest quarterly results, announced last month, the Copenhagen-headquartered company made a $239m loss, with Maersk Line singled out for specific criticism. Søren Skou, CEO of A.P. Moller – Maersk, lashed his shipping division for delivering “unsatisfactory” results. At the time he said measures were being taken to improve performance. These measures are now becoming clear with a number of unprofitable routes being axed.
Maersk is not alone in struggling in the first months of this year with most of its peers also suffering losses amid weak freight rates and higher bunker and charter costs.
“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 contacted cargo. Finally, it seems that some lines are looking at their portfolio of services to determine where is it now profitable to run a service and any that are not will be up for serious scrutiny,” Neil Dekker, container consultant at ClipperMaritime, told Splash.
Maersk has set the tone and together with MSC they have both cut a service from the Asia to Mid-East/Red Sea route – their Horn of Africa and Petra services respectively.
Spot rates into Jebel Ali have been under $500 per teu for most of the year and are 30% on average below the levels of 1H17, according to ClipperMaritime data.
In addition, the AC5 loop previously launched on the Asia to West Coast South America (WCSA) trade in April 2018 as a part of the trade re-organisation, has been suspended, with Maersk taking slots on competitor loops. This loop was operated with the 7,100 teu tonnage previously owned by Hamburg Sud which at the moment remain idle.
“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,” Dekker commented.
It is understood that the re-launch of services on the Asia-WCSA trade in April caused spot rates to fall from an average of $2,000 per teu to $500 per teu in a matter of weeks and so the removal will help restore the supply/demand balance.
On the back on the sweeping changes made in the last two months, latest statistics from Alphaliner show Maersk’s operated capacity has actually dipped for the first time this decade.