Maersk Rate Hikes Hitting the High Notes

Posted on MaritimeProfessional.com by Greg Knowler
Thursday, June 13, 2013

Do we sense a touch of desperation from the executive corridors of Maersk Line as the Triple-E delivery dates approach? 
 

Maersk Line boss Nils Smedegaard Andersen was in a confident mood after his carrier posted a decent $204 million profit in the first quarter. Making a profit when Asia-Europe is a disaster and many other carriers are wallowing in red ink is impressive enough, but the Maersk CEO raised eyebrows when he addressed the rates issue.
He told Reuters he had “no doubt” the carrier could increase rates from their current level of $730 to $1,481 per TEU on July 1. That means doubling freight rates in a market that is being flooded with shipping capacity and has very little to put on the vessels. Seriously?
It is belligerent stuff, but maybe this is why: Next month, the first of a series of 20 triple-E container ships will be launched in the blue Maersk Line livery. By the end of the year, another five 18,000 TEUs vessels will be delivered, and all 20 will be in service by 2015.
That is a tremendous amount of capacity all headed for the Asia-Europe trade, currently embroiled in a rate war that has seen freight rates plummeting to record lows. Lines are desperate to raise rates to more sustainable levels but are finding it particularly difficult. One carrier, Hyundai Merchant Marine, has already postponed a planned May 15 GRI, saying the weak market cannot sustain that sort of increase. The Korean carrier will now try to impose the GRI on June 1.
The market is still trying to digest Hapag Lloyd’s announcement a couple of weeks ago that it will bludgeon customers with a July 1 general rates increase of $1,000/TEU and $2,000/FEU. MSC is also trying to extract a GRI of $750/TEU and $1,500/FEU on Asia-North Europe from July 1.
When pigs fly past your office window you will know they have all been successful.
The market has resisted rates increases for the better part of a year and Maersk Line must be looking on with mounting concern as it prepares to enter the megaship era, so the aggressive stance on freight rates is understandable. It also happens to be the second time this year the carrier has pushed its rate boat out, so to speak.
On January 1, the carrier began levying an additional $1,500 per reefer FEU on all trades, a sudden increase that shocked the market. Tired of pouring money into reefer investment while losing money on the trades, the line raised prices and said it was prepared to lose business if that’s what it took. Whether the strategy will work long term is open to debate, but Maersk has been standing by the new rates with mixed results, with other carriers following suit.
The difference is that there is sustained demand for reefers on many trades with the huge investment required a barrier to entry. But for dry boxes, this latest price hike has been announced at a time when rates are at their lowest, volumes are weak and the once traditional peak seasons now appear to be an anachronistic concept. You will search hard, but in vain, to find a Maersk executive making negative comments about the carrier’s new Triple-Es. However, as the line gets closer to opening its newbuilding floodgates, the pressure to increase rates and ensure the profitability of the giant vessels must be mounting.
Maybe there is something in the pipeline that we don’t know about, like a significant capacity withdrawal of some kind. Because in the absence of any real demand, that is about the only thing that would support such a radical increase in freight rates.

 

(As published in the June 2013 edition of Maritime Reporter & Engineering News - www.marinelink.com)

Maritime Reporter August 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

News

BSEE Conducts Oil Spill Response Equipment Review

Earlier this week, BSEE's Oil Spill Response Division (OSRD) conducted an onsite review of oil spill response equipment listed in DCOR, LLC's Oil Spill Response Plan for platforms offshore Long Beach,

New Bulk Carrier Design Puts Ecoships in the Lotus Position

Ecoships, the technical shipmanagement arm of Newport Shipping Group, has introduced a next generation bulk carrier design, developed to set the standard in ecologically

Polar Code Afoot

The IMO is on the verge of adopting the Polar Code, something that is important and long overdue. The International Maritime Organization (IMO), a specialized agency of the United Nations,

Vessels

New Bulk Carrier Design Puts Ecoships in the Lotus Position

Ecoships, the technical shipmanagement arm of Newport Shipping Group, has introduced a next generation bulk carrier design, developed to set the standard in ecologically

Chevron Announces Alliance with Petrol Ofisi

Chevron has signed agreements with the fuel products distribution and lubricants company of Turkey, Petrol Ofisi in Istanbul, that will result in improved supplies

Rickmers-Linie Appoints Interliner Agencies

Hamburg based Rickmers-Linie has appointed Interliner Agencies as its new agent in South Central Europe. The agency contract covers Slovenia, Austria, Czech Republic,

 
 
Maritime Contracts Maritime Security Offshore Oil Pipelines Port Authority Salvage Ship Electronics Ship Repair Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1461 sec (7 req/sec)