At Least There Won’t Be Financing to Build More Containerships this YearImage: MAERSK COPENHAGEN -(Dow Jones)- Danish oil and shipping company A.P. Moller-Maersk A/S‘s (MAERSK-B.KO) container shipping arm Maersk Line won global market share in 2011 and has successfully implemented shipping rate hikes in the first months of 2012, but still expects to make a full-year loss, as it struggles against over-capacity and still unacceptably low rates, Maersk Chairman Michael Pram Rasmussen said Thursday. Maersk Line, the world’s largest container shipping company, has implemented rate hikes in March and April of $750 and $400, respectively, per standard 20 feet container. Of this, the company has been able to successfully pass on $1000 worth of rate hikes to consumers in total so far, said Pram Rasmussen, speaking at Maersk’s annual general shareholders meeting. Maersk Line expects to implement further rate hikes in 2012, Pram Rasmussen said, but he also cautioned that with increasing over-capacity there remains a “latent risk of rate declines”. In 2011, global shipping rates declined an average of 8%. While the container shipping industry sailed deep in the red in 2011, Maersk Line expanded its global market share to 15.5% at the end of 2011, a level Pram Rasmussen described as “satisfactory”. “We had gotten too far behind in terms of market share, and we succeeded in winning it back in 2011,” Pram Rasmussen said, adding that Maersk Line‘s aggresive growth strategy “with all probability has added to the downwards rate pressure”. Now, he said, focus has shifted decisively to profitability. “We have now decided that we can’t accept the low rates,” he said. The strict profitability-focus will be maintained until an acceptable return has been restored, he said. The imbalance between offered tonnage and demand will, however, widen considerably in 2012, where growth in tonnage will rise by an estimated 10%, while demand is seen to expand by merely 5%. But in the longer term, Pram Rasmussen said, “the supply and demand balance will improve, because the vast losses made by the industry in 2011 means there won’t be financing available to build new ships”. Maersk Line operates some 630 ships world-wide. About 40% of its revenues are made on the Asia-Europe trade route. - Flemming Emil Hansen, Copenhagen Bureau, Dow Jones Newswires
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Billing Shipping’s $1 Billion Hole – The Logistical Challenge of Empty Shipping Containers
By gCaptain Staff On March 15, 2012
A.P. Moller – Maersk What do glass bottles shipped from the Middle East to Europe, used cars from Japan to New Zealand and fertiliser from Russia to Brazil all have in common? They are all examples of cargo previously not worth the cost of transport that are now part of the solution to one of Maersk Line’s largest logistical problems.
“Most countries either export refrigerated cargo and import dry cargo or the other way around. That’s the nature of global trade, but it means our equipment often goes one way full and the other way empty,” says Maersk Line’s Moshe Loberant. “It is an inefficiency the industry has typically accepted, and it is very costly.”Every year Maersk Line spends nearly USD 1 billion related to the shipping of more than 4 million empty dry and reefer containers back to where customers need them. But through more strategic use of its equipment, Maersk Line is sharply reducing the costs of this imbalance, raising the efficiency of its operations and even finding new business. The basic magic of ‘NORs’ Leading this effort in Maersk Line is Moshe Loberant. He is the head of a project that is simply called ‘NOR’ for ‘Non-Operating Reefers.’ A NOR is a reefer container that is used to ship dry cargo. That simple versatility is proving quite powerful in reefer heavy trading corridors (see chart). For instance, Brazil exports thousands of tonnes of fresh produce and meat all over the world. And because of its rapidly growing economy, it also imports a lot of dry commodities for infrastructure and development, leaving Brazil with too many dry containers and too few reefers. Under way for two years If a customer shipping dry cargo to Brazil uses a NOR instead of a dry container, the balance is corrected. Brazil receives the reefer it needs, and Maersk Line removes the cost and time of moving two empty containers – one empty dry container out of Brazil and one empty reefer back into Brazil. The NOR project has been under way for two years and has been studying this and other possible benefits of using NORs in the trading corridors where there is a surplus of dry containers and a shortage of reefer containers. The success so far is encouraging. In 2011, Loberant says approximately 85,000 NORs were utilised by customers, up 30% from 60,000 in 2009 when the strategy was put in place. The associated cost savings were approximately USD $50 million in 2011. He expects both figures to jump again this year. More than just a cost reduction Empty containers take up precious space on ships and they also suck up valuable time for vessels which must stay longer in port, as well as for terminals that must load and unload them. In Santos, Brazil, where reefer containers facilitate the country’s massive reefer commodity exports, NORs help improve port productivity. The port of Santos averages roughly 40 container moves per hour, which is a fairly low rate compared to other major ports. Using NORs reduces the total number of moves required, raising productivity. “By using just 20 NORs to carry dry cargo into Santos, we can replace 40 dry container moves – 20 full dry containers coming in and the 20 empties that eventually go out,” says Michael Hansen, Portfolio Manager for Maersk Line’s Europe – Latin America services. “That is one hour’s worth of improved efficiency we can put into South America’s largest port,” he says. “If a customer uses an NOR in the corridors where we have the biggest imbalances, we give them equipment and space prioritisation which helps them smooth out their supply chain. And in many cases they can receive a discount on the dry ocean freight rate,” says Loberant. So far customers have showed an eagerness to use NORs and the opportunities to expand the project show no signs of slowing down. Maersk Line is even finding that NORs are enabling them to make incremental revenue on cargo that normally would not cover the cost of transport. Examples include Japanese used car exporters using NORs to reach markets in New Zealand and glass bottle manufacturers in the Middle East finding new markets in Europe and the southern hemisphere. In Russia, Maersk Line’s Dennis Caro has used NORs to break into Russia’s three million-tonne market in organic fertiliser shipped to Latin America each year, a business Maersk Line was never interested in before, due to the lack of profit. “Using NORs enables us to enter into new markets which we wouldn’t have cared to enter before, and also to send a reefer where it’s needed, earning money and saving on container repositioning costs,” says Caro, who is a trade analyst for North and South America and in charge of finding break-bulk conversion opportunities in the region. In 2011, NORs out of Russia jumped to 6,500, up from only 300 in 2009. Expectations for next year are even better: Caro says Maersk Line’s entry into the fertiliser business has led to enquiries on NORs from other fertiliser shippers in the Baltic and Black Sea. John Churchill is A.P. Moller-Maerk Group’s External Communcations Manager and is based in Copenhagen.
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