Company ... Maersk
Profit Projections

Maersk profits tumble, Middle East rotation cancelled

Burgess COMMENTARY

Peter Burgess

Maersk profits tumble, Middle East rotation cancelled

Nils Andersen, chief executive of the Danish shipping and logistics giant says container trade has fallen beyond expectations. Nils Andersen, chief executive of the Danish shipping and logistics giant says container trade has fallen beyond expectations.

Maersk Line has cancelled a Middle East-Europe port rotation while parent company AP Moller-Maersk has issued a rare profit warnings as freight rates on key trade routes continue to tumble.

Nils Andersen, chief executive of the Danish shipping and logistics giant, which owns the largest shipping line in the world, said profit expectations for 2015 had been revised down by US $600-million, from an anticipated US $4-billion to US $3.4-billion.

The previous expectation, as announced in the Danish firm’s Q2 report, was based on an underlying result contribution from Maersk Line above US $2.2-billion. The group now expects an underlying result from Maersk Line of around $1.6-billion.

“It is regrettable that we have to adjust our expectations for the 2015 result. All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries,” said Anderson.

“Maersk Line has over the years taken steps to ensure a cost-effective and resilient operation, but the current deterioration in the container shipping market is impacting our business,” he added in a statement.

The company said the container shipping market declined in September and October beyond its expectations, with little chance of recovery during the rest of the year.

Fewer containers were carried than expected, with average freight rates 19 per cent lower than during the same period last year.

Routes between Asia and Europe have been particularly weak, with Bloomberg Intelligence explaining that the World Container Index had hit a record low for a third consecutive week, with two of the eight biggest world trade lanes at all-time lows.

The Asia-Europe routes are Maersk Line’s most lucrative, but with the Chinese economy slowing and manufacturing data proving particularly weak, demand for shipping goods has suffered.

In addition, the main trade routes, the Asia-Europe rotations in particular, are being hampered by oversupply as a result of shipping lines’ adding ultra large container ships to their fleets to reduce the per-teu cost of transporting goods.