Maersk Line: Deploying More Capacity is "Really Stupid, Stupid Strategy"

Soren Skou, chief executive for Maersk Line, said the industry could be close to another rate war

Overcapacity continues to plague the shipping market, leaving owners torn between contributing to the glut of tonnage and falling behind competitors who are ordering larger and more fuel-efficient ships, Dow Jones Newswires reports.

"It is a really stupid, stupid strategy to deploy more capacity," Søren Skou, chief executive for Maersk Line told a shipping conference last month.

Skou has also warned that the industry could be close to a rate war unless more vessels are removed from service.

Maersk Line dropped its capacity by 14 percent last year, yet the company has also ordered 20 new triple-E ships with a capacity of 18,000 twenty-foot equivalent units (TEUs) each.

Nils Andersen, CEO of Maersk Line's parent company, A.P. Moeller-Maersk (Maersk), recently said the company will introduce the Triple-E ships gradually while removing smaller ships to avoid flooding the market with more capacity.

China Shipping Container Lines Co. (CSCL) recently announced it is also ordering five of the ships.

Bigger Ships

Lars Jensen, chief executive of Danish research firm SeaIntel Maritime Analysis said that "in three to four years, major shippers will operate Europe-Asia with ships of 14,000 and above."

"Those who don't have these ships won't be able to compete."

Ship operators say that the larger vessels are more fuel-efficient and generally more cost effective, an important point when 23 of the 30 biggest shippers in the world lost money in 2012, according to shipping analyst Alphaliner.

Maersk Line says the Triple-E vessels will consume 35 percent less fuel per container than 13,100 TEU ships.

Also contributing to overcapacity in the industry is the difficulty shipowners find in selling vessels.

"The only option for getting out is scrapping," said one Greek ship owner.

"If I scrap, I'll be ruined as I can't pay the bank back and the bank will be saddled with nonperforming loans it can ill afford.

"So I limp along putting money into the ships from other parts of my business and hope for better days ahead."