Maersk Line plans to cut its deployed capacity by implementing another round of slow-steaming in the Asia-Europe trade.
"It is loss-generating to sail Asia-Europe at the moment, and therefore it is crucial for those in the market that the rates are raised," Nils Smedegaard Andersen, CEO of Maersk Line parent A.P. Moller-Maersk, said in an interview with the Wall Street Journal.
"There is no need for the number of ships currently sailing, so it is only natural that we consider reducing the capacity," he said.
Freight rates in the Asia-Europe trade, which had turned profitable earlier in the year, have declined each of the last seven weeks as the recession in Europe cut demand and vessel utilization rates dropped.
At the same time, bunker fuel prices have climbed, making the trade unprofitable.
Maersk Line’s effort to reduce capacity follows moves by other carriers in the Asia-Europe trade to cut capacity. The G6 Alliance between carriers in the Grand Alliance and the New World Alliance suspended one of its Asia-Europe services earlier this month because of “the forecast lack of improvement” in the trade.
The World Container Index of spot rates in the trade from Shanghai to Rotterdam, compiled by Drewry and the Cleartrade Exchange in Singapore, fell $146 on Sept. 20, or 5.7 percent from the previous week, to $2,396 per loaded 40-foot-equivalent container unit.
That’s a drop of $1,125 per FEU, or 31.9 percent, from the year’s highest spot rate on July 5, when it reached $3,521 per FEU.
Andersen didn't quantify how much capacity Maersk Line hopes to be able to take out. The company plans to raise rates by between 10 percent and 11 percent on its Asia-Europe routes from Nov. 1.
“In my view, the industry is very well aware that a rate war is no solution to declining volumes and excess capacity; it will only make it worse. We, at least, will seek to stabilize rates," Andersen told the Wall Street Journal.
Maersk expects global seaborne freight demand to grow 4 percent in 2012 and between 5 percent and 7 percent in the coming years, Andersen said. He also confirmed Maersk Line's full-year expectations of a moderate net profit, compared with a $602 million loss in 2011.