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Published: 4 November 2015
Maersk announces big cutbacks
Leading carrier to cut 4,000 staff and cancel options on eight new vessels totalling nearly 125,000 TEU in additional capacity
Maersk Line CEO Søren Skou has announced its plans to “accelerate efficiency initiatives” in response to the deteriorating market for container shipping.
“Maersk Line will reduce its network capacity and postpone investments in new capacity, while the same time reducing operating costs by escalating already announced plans to simplify the organisation. In light of the lower demand these initiatives will allow Maersk Line to deliver on the ambition to grow at least in line with the market to defend the market leading position.
“Over the next two years, Maersk Line expects to lower the annual Sales, General & Administration (SG&A) cost run-rate by USD 250 million with an impact of USD 150 million in 2016. SG&A savings will be derived from already initiated transformation projects and the standardisation, automation and digitalisation of processes” the carrier stated.
Maersk Line is will not exercise options on six 19,630 TEU vessels and two 3,000 TEU “feeders”. It has also “postponed a decision on an option for eight 14,000 TEU vessels. Four services closures (ME5, AE9, AE3 and TA4) have already been announced and plans are in place to cancel 35 sailings in Q4. In a conference call Skou denied rumours that Maersk laid up one of its Triple E vessels.
Maersk Line is taking these rather drastic steps at time when the global economy is not overall in recession - global economic growth in 2015 is forecast to be at around 2.5%. In the 1990s containerised traffic could have been expected to grow at twice that rate, but that multiplier has now halved. Global consultancy Deloitte chose the title “Global trade not what it was” for the latest edition of its weekly briefing. It noted “Trade is now growing at the slowest rate outside a recession on record”.
The bigger problem for the shipping industry is growth in the container vessel fleet is going in the other direction, increasing by an estimated 7 - 7.5% this year. As analysts have been saying for some months now, at some point supply and demand have to come back into balance.