Maersk Line May Cut Unprofitable Contracts

by Ship & Bunker News Team
Thursday November 20, 2014

Maersk Line is considering cutting its unprofitable long-term contracts as it looks to combat plunging freight rates on Asia routes, Wall Street Journal reports.

According to Silvia Ding, head of Maersk's Southern China operations, the spot rate between Asia-Europe is "unprofitable," which has prompted the company to look at shedding underperforming contracts when they come up for renewal.

"If we can't get the rate up to a sustainable level, then in some cases it might mean we have to walk away from certain businesses," she said.

Asia-Europe contracts renewals typically begin in April, while Asia-U.S. start in May.

Maersk announced plans to raise its Asia-Europe rates on November 1, 2014 last month, though previous attempts to do so in the past have not met success. 

Weak demand and overcapacity had plagued the shipping industry in recent years, and is expected to continue for at least another two, according to Ding.

"We need to be more disciplined in pushing the general rate increase to make sure it is sustainable," she said.

The company reported a stronger-than-expected third quarter last week, with revenues rising 24 percent from the year before to $685 million