Maersk Line's Skou Says Loss-Making Shippers "a Concern"

Skou would trade Maersk's margin gap for profitability across the board

Maersk Line CEO Søren Skou has said a large number of loss-making shippers is bad for the industry and world trade in general, The Financial Times reports.

Maersk Line's operating margin for the first nine months of 2014 was around 8.2 percent, which compares, according to the report, to an average second quarter operating loss of 0.3 percent among 13 competitors tracked by Maersk Line.

Of those 13 rivals, ten either made a loss or broke even.

"It is a concern that the industry as a whole is not profitable," said Skou.

"We need as an industry to be able to fulfil our role in the world of facilitating global trade and providing services at a low cost.

"It is a concern that prices are so low that a big number of carriers are unable to make a profit and enough cash to replace assets."

Maersk Line has turned a $550 million loss in 2011 into an expected net profit for 2014 of $2 billion, as a result of a strong cost cutting regime and the introduction of Triple E box ships.

"Lower costs are a lifestyle change, not a diet," said Skou, acknowledging that as rates continue to decline, costs must fall even faster to maintain margins.

Maersk Line's rivals have not been able to cut costs with the same rigour, which continues to put downward pressure on rates for the industry and exacerbates problems from overcapacity, according to Skou.

Stronger industry preferable

While leading the field among container shippers is desirable, Skou said he would prefer that the industry was operating sustainably from an economic perspective.

"For Maersk Line it is advantageous to be in a position where we are growing better than the industry," Skou admitted.

"But we would rather live with a lower margin gap and a higher average profitability."

Maersk Line expects its alliance with Mediterranean Shipping Co. to reduce costs further from January 1, 2015.