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Maersk Line axes more Asia-Europe capacity
By Janet Porter in Copenhagen - Friday 24 October 2008
Maersk will temporarily suspend its AE8 service.
The Danish line confirmed this morning that its AE8 service will be temporarily suspended from mid-November, but has made no decision about when it may be reinstated.
The slack period usually lasts from about now to May, when cargo volumes pick up in preparation for the pre-Christmas sales, but that seasonal upturn never occurred this year.
The latest withdrawal of capacity from this route follows the termination of Maersk’s AE5 loop in May.
Maersk is one of a number of carriers to axe Asia-Europe services in the face of depressed demand and plunging freight rates.
Earlier this week, New World Alliance lines APL, Hyundai Merchant Marine and MOL announced plans to reduce capacity on this route by about 20%.
Maersk’s cuts are a little less draconian. Stopping the AE8 and AE5 services will nominally remove around 15% of slots. However when taking into account larger ships introduced on some other Maersk Line Asia-Europe strings, the line will have made a net reduction of about 10% of westbound capacity.
"The current Asia-Europe market is characterised by unsustainable rate levels, said Maersk Line’s group senior vice-president Robert Steen Kledal.
"The changes will support our market position and ensure that our network is sustainable in the long-term."
The nine 7,600 teu ships will be switched to Maersk’s AC service that covers the Asia-Caribbean trades. Some of the vessels now on that route, of about 6,500 teu, may be returned to their owners, redeployed in other parts of the network, or used to position empty reefer container in South America in preparation for the start of the peak season for refrigerated produce exports early next year.
The latest service shake-up will leave Maersk with eight Asia-Europe loops. Adjustments are being made to the others to ensure full market coverage.
"There are no missing port pairs," Mr Kledal said.
Maersk’s AE1 and AE10 services, for example, will be extended to cover Scandinavia, while two new ports are being added to the AE6 loop
A ninth ship is also being incorporated into the AE3 string.
All Asia-Europe loops have now acquired an extra vessel as Maersk Line reduces vessel speeds in order to cut fuel consumption. This strategy will be maintained for the long-term, regardless of oil prices.
"Slow steaming is here to stay," Mr. Kledal told Lloyd’s List.
Despite pulling capacity from the Asia-Europe trades and earlier withdrawals from the Pacific, Maersk Line has no containerships in lay-up.
And although other lines have talked about laying up containerships, industry sources do not think this has happened yet.
Instead, ships are left idle for a few weeks rather than taken fully out of service, which is a complicated process and major commitment that could involved shutting everything down and removing the crew.
Maersk Line has a market share of around 15% in the Asia-Europe trades, and chief executive Eivind Kolding has made clear that the carrier intends to keep that level.
That determination was reiterated in a statement announcing the suspension of the AE8 loop.
The whole trade is caught up in a tremendous price war that has seen spot ocean rates from Asia to northern Europe plunge from around $1,400 a teu or more, to about $275-$325, excluding surcharges for fuel, currency adjustments and terminal handling.
Spot rates only cover about a third of the market, but the rate collapse comes at a time when lines are starting to negotiate six- or 12-month contracts for 2009.
Although Asia to Europe volumes are expected to show an increase of a few percentage points over 2007 levels this year, trade in the second half of 2008 has weakened sharply and is almost certain to be down on the figures for the corresponding period of 2007.
Since the market started to weaken in the early months of the year, a number of strings have been cancelled, although the amount of capacity withdrawn is hard to gauge as new, bigger tonnage has been phased in over the same period.
To make matters worse, eastbound volumes from Europe to Asia have also slipped after companies in the Far East started to source low value commodities such as waste paper in the US because of the weaker dollar. However, that position could be reversed again as the US currency gains ground.
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