Executive Briefings

Maersk CEO Predicts 'Modest' Growth in Container Shipping

A.P. Moller-Maersk relied on higher freight rates and cost reduction schemes to lift fourth-quarter profit, but modest growth expectations and concerns about pricing has the Danish shipping conglomerate relying increasingly less on mature shipping markets and turning the focus to emerging markets and its oil business.

Maersk is the world's largest container shipping company in terms of revenue, but in recent years has increasingly focused on other endeavours, such as oil production and drilling. While the Maersk Line shipping business represents the bulk of the company's revenue, Maersk Oil delivered most of the profits.

Maersk expects negative first-half growth in the European shipping business, and a glut of capacity that makes it difficult for any players in the container shipping business to make money. Maersk returned its shipping line to profitability in 2012 and expects to improve again in 2013.

"It was a hard year for the container market, so we are glad we made profit in this segment," Chief Executive Nils Andersen said. In 2013, container shipping growth is seen at a "modest" 4 percent to 5 percent amid "bleak" westbound traffic on Asia to Europe routes.

The company warned that "without significant capacity adjustments, the container shipping market is most likely to see a continued downward pressure on freight rates."

Market observers are questioning the willingness of customers to continue swallowing price hikes.

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Maersk is the world's largest container shipping company in terms of revenue, but in recent years has increasingly focused on other endeavours, such as oil production and drilling. While the Maersk Line shipping business represents the bulk of the company's revenue, Maersk Oil delivered most of the profits.

Maersk expects negative first-half growth in the European shipping business, and a glut of capacity that makes it difficult for any players in the container shipping business to make money. Maersk returned its shipping line to profitability in 2012 and expects to improve again in 2013.

"It was a hard year for the container market, so we are glad we made profit in this segment," Chief Executive Nils Andersen said. In 2013, container shipping growth is seen at a "modest" 4 percent to 5 percent amid "bleak" westbound traffic on Asia to Europe routes.

The company warned that "without significant capacity adjustments, the container shipping market is most likely to see a continued downward pressure on freight rates."

Market observers are questioning the willingness of customers to continue swallowing price hikes.

Read Full Article