Maersk Line's Third Quarter Profit Dives
Maersk Line’s third quarter 2015 profit was $264 million, 61.4 percent lower than its third quarter 2014 result.
Throughout 2015, the average freight rate has declined due to weak demand, over-capacity and intense price competition, said the company in a statement. Maersk Line’s average rate decreased by 19.2 percent compared to the third quarter of 2014 and 4.3 percent compared to the last quarter. In the Asia – Europe trade, rates reached an all-time low, and the trade has contracted with 6.5 percent year-to-date.
“Our third quarter result is clearly less than satisfactory,” says Søren Skou, CEO of Maersk Line. “This result is driven by much weaker than expected demand and low rates. We will accelerate efforts to drive out cost and we will reduce capacity to increase network utilization.”
Maersk Line expects the container shipping market to remain weak and not recover in 2015. We expect the rates to remain under pressure due to continued over-capacity, says Skou. Maersk Line expects global container demand in 2015 to grow by one to three percent against a previous expectation of two to four percent.
“We have a cost effective network and a strong competitive position. We are determined to keep it that way. To stay competitive, we must continue optimizing our network and simplifying our organization. We have to continue to innovate and find new ways to increase our productivity and provide a better service at a lower cost,” says Skou.
On November 4, Maersk Line announced that it will accelerate efforts to reduce operating cost and postpone investments in new capacity. This includes not exercising the options for six 19,630 TEU vessels and two 3,600 TEU feeders.
Maersk Line placed its third newbuilding order this year with the signing of a contract for nine 14,000 TEU vessels with a value of $1.1 billion, and with the option of an additional eight vessels, to be delivered in 2017.
At the end of the third quarter, the Maersk Line fleet consisted of 282 owned vessels (1.8m TEU) and 322 chartered vessels (1.2m TEU) with a total capacity of 3.0m TEU. Maersk Line’s nominal fleet capacity decreased by 1.7 percent and the average vessel size increased by 0.7 percent compared to the second quarter of 2015.
Compared to the third quarter of 2014 the nominal fleet capacity has increased by 6.7 percent. Idle capacity at the end of the third quarter of 2015 was 32,086 TEU (three vessels) versus 1,122 TEU (one vessel) at the end of the third quarter of 2014. Maersk Line’s idle capacity corresponds to around four percent of total idle capacity in the market.
The global container fleet has grown by almost nine percent compared to the third quarter of 2014, and at the end of the third quarter of 2015 it stood at 19.7m TEU of which four percent were idle. Deliveries amounted to 501,000 TEU (64 vessels) and 28,000 TEU (23 vessels) were scrapped during the third quarter of 2015. During the same period 794,000 TEU (157 vessels) of new capacity were ordered, keeping the order book at around 21 percent of the fleet, according to Alphaliner data.