Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Maersk Profits Fall by Nearly Half on Low Freight Rates

Register for the Feb. 17 webinar, De-Risking Supply Chains Through Nearshoring, today to learn how to realize the benefits of localizing supply chains from factories that are helping brands successfully produce in the U.S.

cargo_ship_port

Thanks to market imbalances that kept container freight rates low and oil price movement that was also low, A.P. Moeller-Maersk took in close to 44 percent less profit in the third quarter.

The Danish shipping company said in a statement Wednesday that profits for the group fell from $778 million to $438 million, due mostly to the low freight rates—which were 16 percent lower than average.

Maersk Line was the group’s biggest ill, driving the profit loss and bringing revenue down 9.2%, a $933 million loss. Were it not for an increase in market share with 11 percent higher container volumes, Maersk Line’s losses would likely have been worse.

“Maersk Line continues to face challenging market conditions and as a testimony to the situation the container industry saw its first major bankruptcy in 30 years,” the company said in a statement, adding that the Hanjin Shipping bankruptcy gave a short-term bump in demand for its services, but the overall impact was limited as was Maersk’s business with Hanjin.

For the third quarter, Maersk Line reported a $116 million loss (compared to $264 million in profit at the same time last year). Revenue slid 11 percent to $5.4 billion, driven by the 16 percent plummet in average freight rates, which were $1,811 per 40-foot equivalent unit (FFE).

“A significant part of the growth was due to more backhaul cargo at lower rates than headhaul,” Maersk said. “With an increase in fleet capacity of 3.8%, the increase in volumes represented an improvement of network utilization.”

Container freight rates were down across the board, though North America, West Central Asia and Africa dipped the most.

“The decline in North American average rates reflected increased competition, but was also impacted by a mix effect from increased backhaul volumes at lower rates,” Maersk said.

Global container demand grew between 1 percent and 2 percent, still subdued because emerging economies continue to face challenging economic conditions. Imports into parts of Africa and Latin America fell, while container imports into Europe and North America continued to grow, Maersk said.

Looking ahead, the group expects Maersk Line results to come in significantly lower this year than last, with an expected negative result.

Maersk Group shares were down 7 percent at the time of publication.

Related Articles

More from our brands

Access exclusive content Become a Member Today!