Maersk: Small and Mid-Size Operators Set to Be Squeezed Out of Box Market

A.P. Møller-Mærsk A/S CEO Nils Andersen said that most smaller players have been unprofitable for the last seven years.

According to A.P. Møller-Mærsk A/S CEO Nils Andersen, small and mid-size containership operators are set to be squeezed out the market in the coming years by larger shippers such as Maersk Line, the Wall Street Journal reports. 

As the container shipping market weakens, in particular along the Asia-Europe routes where freight rates have been plunging for some time, he says it is expected that smaller players will sink further into debt.

"I can't speak for other companies, but small and mid-size carriers-controlling a 3 percent to 5 percent market share - with very few exceptions - have been unprofitable for the last seven years," said Andersen.

"After such a long period of not being profitable, it defies logic to continue to invest in the business."

He admits that overcapacity has been plaguing the entire industry, an issue that will not be solved in the near future with industry growth pegged to only gain 3-5 percent over the next year.

"Some of those companies have not been able to identify an acceptable way to exit the business, so they continue to throw good money after bad money by investing in more vessels," he said. 

Many companies including Maersk Line have ordered mega-containerships in an effort to cut down on per-container costs, a trend which has also exacerbate the overtonnaging problem.

However, Andersen said that the company faces less of a risk with larger ships, largely due to its larger market share, profitability, and strong balance sheet. 

Maersk Line already controls just over 15 percent of global capacity, according to Alphaliner. 

Last week, Maersk Line confirmed an order for 11 mega-containerships with a capacity of 19,630 TEU, which will be the largest ships in its fleet.