October 12, 2012

Maersk Cuts Shipping Again as Demand Slows

Asia-Europe route to see 19 fewer ships; company may drop additional capacity

The largest container shipping line in the world, A.P. Moeller-Maersk A/S, announced that it is cutting 19 ships from Asia-Europe trade lanes as demand falls and expenses rise.

Bloomberg reported Friday that Copenhagen-based Maersk is permanently eliminating its AE5 service and its eight vessels. Its AE9 route, with 11 ships, will not sail again until early December. Maersk, which cut 9% of capacity in February, thus brings the total cut for the year to 21%.

London-based ship broker ICAP said in the report that the drop in demand from Europe thanks to the debt crisis caused Asian container rates to drop below the break-even point. In a statement, Maersk said that with continuing weakness in the economy, volumes could fall 3% for 2012 as a whole, and as a result the company might remove more ships and cut sailing speeds to further manage capacity.

“There is currently no need for the number of ships sailing,” said Vincent Clerc in the report. Clerc, Maersk’s chief trade and marketing officer, added that the company will take steps to adjust to declining demand “without reducing our market position.”

The ships on the Maersk Line AE5 service can each carry up to 6,500 standard 20-foot containers of TEUs (20-foot equivalent unit). The ships that sail the AE9 route have a capacity of 8,000 TEUs.

Although A.P. Moeller-Maersk stock has gained 7.3% so far in 2012, it was down 0.9% around midday in Copenhagen. The Shanghai Containerized Freight Index, which serves as a measure of rates for goods leaving Shanghai—the busiest port in China—also dropped Friday, losing 1.1% and hitting its lowest level since March 23.

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