The adage: “where there is a will, there is way” is the headline for this week’s news coming from the leader of ocean container shipping. A combination of factors has led to an improved financial outlook for the industry leader in ocean container shipping.   389

This week, A.P. Moeller-Maersk, the parent of Maersk Line reported its Interim Report Q2-2014 reflecting current and expected financial results. That report indicates that Maersk Line made a profit of $547 million compared to $439 million a year earlier. These results were reportedly achieved by a 4.4 percent reduction in overall costs and a volume increase of 6.6 percent. At the half-year mark, average freight rate was reported as $2631 in the first six months compared with $2691 at the same point in 2013. Cash generated from operating activities in Q2 was $870 million. 

The practice of slow steaming coupled with continued deliveries of larger, more fuel-efficient container vessels contributed to cost reductions. The average bunker fuel cost was noted as $580 at the half-way point, compared with $608 in 2013, a decrease of 4.6 percent. During Q2, Maersk Line took delivery of three new Triple E (54,000 TEU) container vessels. Idle capacity in Q2 was reported as the equivalent of 19,000 TEU (four vessels).

Some good news for the ocean container segment are indications from Maersk that the Asia to Europe traffic segment is showing some signs of positive uplift.

The parent group expects Maersk Line to earn “significantly” above 2013 results for the full fiscal year. There are also high expectations for the pending ten year 2M alliance with Mediterranean Shipping Company (MSC) which is expected to carry upwards of 35 percent of all goods moving from Asia to Europe. In reporting of parent results, the Wall Street Journal quotes Maersk CEO as indicating that he fully expects industry competitors to further seek inter-line capacity agreements similar to the 2M alliance. That remains consistent with our Supply Chain Matters 2014 prediction and we continue to believe that industry supply chain teams should anticipate continued consolidation activity for the industry in the coming months.

With Maersk’s Line’s latest results, the gap is starting to widen among the industry leader and other lower-tier industry players, and events should be even more dynamic in the coming months. Maersk Line’s Q2 report provides other interesting statistics on the state of overall capacity in the industry. It indicates that the global container fleet has grown 5 percent since Q2-2013 to a level of 17,794 million TEU’s.  Scrapping’s were the equivalent of 49 vessels while 59 far larger newer vessels entered the global fleet. Competitiveness and profitability is now governed by the existence of more efficient vessels or increased shipping volumes.

Bob Ferrari