A.P. Moller Maersk’s profit from container business in the first half of the year plunged 67.9 percent year-over-year to $393 million because of falling freight rates and higher fuel prices, the operator said Wednesday.
Revenue from the Maersk Line and Safmarine container shipping lines rose 5 percent to $13.2 billion over the first half of 2010 on a 6 percent increase in volume. But average pricing across the global networks fell 8 percent, excluding bunker fuel surcharges, and the Danish group repeated its warning for “slow economic growth and market volatility to continue for the coming quarters.”
The company expects global demand for seaborne containers to grow between 6 percent and 8 percent in 2011. But, the group said, “The global supply of new tonnage is expected to grow more than the freight volumes, especially on the Asia-to-Europe trade.”
By the Numbers: Container Rate Benchmark
As a result it said freight rates will remain under pressure, and high bunker and time charter costs are expected to continue to cut into margins.
The volume of containers transported by Maersk Line and Safmarine in the six-month period increased 6 percent year-over-year to 3.8 million 40-foot equivalent units. Average freight rates, including bunker surcharges, fell 3 percent from the same period last year to $2,900.
Bunker fuel costs of $578 per metric ton in the first half were 26 percent higher year-over-year.
The rates deteriorated during the first half of the year, falling 0.6 percent from the first three months of 2011 to the second quarter.
But the declines were not spread equally. The company said rates on Asia-Europe lanes fell 12 percent on average in the first half of the year despite a 9 percent gain in volume.
Trans-Pacific rates actually grew 6 percent, however, despite a 6 percent loss in volume.
Despite these pressures, the company said it expects its container activities to generate “a modest positive result” for the full year.
The company’s total profit for the first half of 2011 increased 8 percent to $2.7 billion from the same period a year ago, primarily because of stronger container volume and higher oil prices at its terminals.
Overall company revenue for the first half of the year increased by 9 percent to $30 billion from $27.4 billion last year.
APM Terminals generated a profit of $304 million, compared to $504 million last year, excluding divestment gains and other items.
Container throughput at APMT increased 8 percent, and it earned a return on invested capital of 12.2 percent.
Damco, the company’s combined logistics brand, earned a profit of $21 million in the period, up 40 percent year-over-year from $15 million.