Danish container carrier Maersk Line has decided to postpone the delivery of its nine 14,000 TEU vessels currently under construction with delays between one month and one year.
The company said that the last vessel from the batch, being built by South Korean Hyundai Heavy Industries, will be delivered by the end of 2018, a year later from the previously scheduled delivery date of 2017 end.
Despite some positive developments seen in the second half of 2016, freight rates remain depressed and unsustainable. “That is why we will continue to manage our capacity tightly,” Pierre Danet, CFO of Maersk Line, said.
Expected to have a positive effect on Maersk Line’s cash flow, the move was made on the back of a “very challenging” market situation.
The decision was announced as part of the company’s financial report in which Maersk Line informed that it recorded a loss of USD 376 million in 2016 driven by a 19% decline in freight rates year-on-year, against a profit of USD 1.3 billion seen a year earlier.
The company’s revenue for the period stood at USD 20.7 billion, 13% lower than in 2015 when it was USD 23.7 billion.
By the end of 2016, Maersk Line’s volumes grew by 9.4% to 10,415k FFE, up from 9,522k FFE handled in 2015, as the shipping giant managed to win a significant market share.
All trades contributed hereto with largest increases in the East-West backhaul with 19% and North-South head haul with 7.3%.
“This loss is clearly unsatisfactory. On the positive side, we won market share, we continue to drive costs down and we increased our utilisation. We remain competitive. And we have a strategy that addresses the challenges in our industry. It will ensure that we continue to focus on customers, that we maintain our leadership position and that we again become profitable,” Danet said.
In 2016, the container shipping demand growth was about 2-3% and the global container fleet growth was about 4% compared to 2015. The gap between capacity entering and exiting the industry was the lowest in many years.
“Overall, container shipping demand grew below our expectations. However, in the last half of 2016, we experienced better industry conditions than in the first half. First due to a better supply demand situation, which resulted in an improvement in freight rates,” Danet added.
Due to gradual improvements in container rates Maersk Line expects an improvement in excess of USD 1 billion in underlying profit compared to 2016, while the global container shipping demand is set to increase by around 2-4% in 2017.