Maersk Line said Friday it lost $297 million on shipping in the third quarter amid collapsing freight rates on the key Asia-Europe trade lane, and the world’s largest ocean container carrier said it would close the year in the red.
The loss, following a $1 billion profit in the third quarter a year ago, came as average freight rates, including bunker surcharges, across Maersk’s global system declined 12 percent to $2,860 per 40 foot container from $3,251 in the third quarter of 2010.
The Copenhagen-based line lost $124 on every 40-foot container it transported compared with a “close to a record” $616 per-box profit in 2010.
This eroded the impact of a 16 percent increase in traffic to 4.2 million 20-foot equivalent units from 3.6 million TEUs, leaving revenue up a modest 4 percent to $7.23 billion.
Nils Andersen, CEO of parent company A.P. Moller-Maersk, blamed excess ship capacity for the “dramatic” and “highly unusual” slump in ocean freight rates in the peak shipping season to levels last seen in the 2009 container shipping slump.
“Everybody was gearing up for the peak season in the third quarter and the peak season didn’t occur,” Anderson said.
The underperforming container business was largely responsible for A.P. Moller-Maersk reporting a bigger-than-expected 78 percent drop in net profit to $371 million, from $1.67 billion in the third quarter of 2010.
The company forecast a full-year net profit of $3.1 billion to $3.5 billion compared with $5.02 billion in 2010 of which Maersk Line contributed $2.64 billion.
Maersk Line’s Asia-Europe traffic soared 24 percent in the third quarter while rates plunged 26 percent. But Anderson denied the carrier is waging a war of attrition on its largest trade lane. “We are not leading a price war … but we are determined to stand firm,” he said.
Traffic grew 2 percent on the trans-Pacific while rates were down 16 percent. Latin American shipments grew 18 percent as rates dropped 13 percent.
”We see a couple of tough years ahead,” for the industry, Anderson said, marked by continued overcapacity and very unstable earnings.
“It’s not an environment for small players and those without strong balance sheets,” he said.