Maersk to buy new ships

[COPENHAGEN] The world's biggest container line will order new ships for the first time in four years as the industry shakes off its worst crisis in four decades.

Nils Smedegaard Andersen, the chief executive officer of AP Moeller-Maersk A/S, said the Danish company may focus on purchasing smaller vessels than it has bought in the past.

"The lower the oil price gets, the less benefit the larger ships offer," he said in an interview from Copenhagen. "We're not making long-term plans based on what the oil price is exactly today, but nevertheless we're currently looking into what effect the low oil price should have on our vessel size." The decision marks a shift from the container shipping industry's strategy so far. Vessels built by Maersk Line and its competitors had grown ever larger to save fuel since containerization went global in the 1970s. Maersk Line set itself apart as a pioneer, claiming at least four world records for the biggest ships over the past two decades. Its most recent mega-ship project was in 2011, when it ordered 20 Triple-E class vessels that each carry more than 18,000 containers.

The industry is still suffering from overcapacity. Excess supply in 2009 triggered a slump in freight rates as volumes contracted in the wake of the global financial crisis. Though there's still too much capacity in some parts of the industry, "the situation looks better now than it has for a while," Mr Andersen said.

"We need to get new ships by 2017 if we want to keep up with the growth in the market, and we will place orders this year, probably already in the first half," he said.

Maersk shares rose as much as 3 per cent in Copenhagen trading and were up 2.5 per cent to 15,640 kroner at 9.32 a.m. The stock jumped 9.5 per cent Wednesday and now trades at a record high after exceeding a 2007 peak.

Maersk Line needs its new ships to have a combined capacity of 425,000 standard-size containers in the period 2017 to 2019 to keep its market share, according to its earnings report published on Wednesday. That's equivalent to about 23 of the Triple-E ships on the market.

"We may order Triple-E ships, but don't expect an order of 20 or 30 ships this year because we need to time it carefully so we grow with the market," Mr Andersen said. Though the lower oil price makes larger ships less attractive, Maersk is still "looking at both smaller and larger ships and we will probably place orders in both segments," he said.

Maersk Line said Wednesday its fourth-quarter net operating profit after tax more than doubled to US$655 million as higher shipping volumes and lower fuel costs more than countered a decline in freight rates.

Maersk Line's shipping volumes grew 6.8 per cent last year, as the global market expanded 6 per cent, according to an estimate provided by BIMCO, the world's largest international shipping association. The company now has a global market share of 15.7 per cent, compared with 15 percent six months ago, according to data from Alphaliner SA.

"We're not intentionally trying to gain market share," Mr Andersen said. "When some of our competitors scale back, that leaves more for us. We're not having a price war as customers have come to us." Maersk Line expects to invest about US$3 billion a year through 2019 on new vessels and on retro-fitting current ships. The money will also go toward more containers, according to a September presentation.


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