Bruce Barnard, Special Correspondent | Feb 27, 2012 8:24AM EST
Maersk Line will remain in the red this year after slumping to a $602 million loss in 2011 from a record $2.6 billion profit in 2010, said A.P. Moller-Maersk, parent of the world’s largest ocean carrier.
Maersk Line’s loss, driven by sharply lower freight rates especially on the Asia-Europe route, and a 35 percent increase in fuel costs, squeezed Copenhagen-based A.P. Moller-Maersk’s net profit by 33 percent to $3.4 billion.
Container revenues, dominated by Maersk Line, grew 5 percent year-over-year to $25.1 billion. Cargo volume increased 11 percent — outpacing estimated market growth of 7 percent — to 16.2 million 20-foot equivalent units. The average freight rate, including bunker surcharge, slipped 8 percent to $2,828 per 40-foot container from $3,064 in 2010.
Maersk’s mounting quarter-by-quarter losses reflect an aggressive push for market share that is widely held to be responsible for the slump in freight rates across most liner routes. Cargo volume soared 18 percent in the fourth quarter of 2011, but the average freight revenue was 12 percent down on the same period in 2010.
The fourth quarter loss of $663 million, compared with a $388 million profit a year ago, was more than double the $297 million loss in the third quarter.
A.P. Moller said it expects the group to be profitable this year, though "lower than the 2011 result," with the Maersk liner business staying in the red.
A.P. Moller's Maersk said it “more than regained” the market share lost during 2010 but revealed it lost $75 on each 40-foot container shipped in 2011 compared with a $384 profit a year ago.
The carrier boosted Asia-Europe volume by 16 percent but rates declined 19 percent, while trans-Pacific traffic increased just 2 percent and rates dipped 7 percent. Trans-Atlantic volume stagnated but rates rose 2 percent.
Maersk has activated lay-up plans and will make more extensive use of super slow steaming. “More specifically, Maersk Line will optimize its pricing practices and adjust its capacity to improve market balance,” A.P. Moller-Maersk said.
Maersk announced earlier this month it will cut Asia-Europe capacity by 9 percent, a move analysts saw as a strategic volte face by the carrier which earlier appeared to accept losses to defend market share and drive out weaker competitors.
“There will be overcapacity in the market, especially Asia-Europe. That must be dealt with,” said A.P. Moller-Maersk Chief Financial Officer Trond Westlie.
But Maersk CEO Soren Skou has warned rivals the carrier “will defend our market share position at any cost.”
-- Contact Bruce Barnard at brucebarnard47@hotmail.com.
