Maersk Line CEO: Container shipping consolidation next step after alliances

Maersk Line CEO: Container shipping consolidation next step after alliances
Søren Skou, CEO of A.P. Moller – Maersk

Consolidation between container shipping lines is required to alleviate the pressures of weak demand according to Soren Skou the CEO of Maersk Line.

Skou told The Wall Street Journal: “We are getting the expected benefits from vessel-sharing agreements, but more can come from consolidation.”

He added: “Maersk Line spends half a billion dollars in [information technology] every year. It is big money. In consolidation, the cost would be shared. It is the same with operating individual headquarters and the cost of containers.”

As many as 16 of the world’s top 17 shipping lines, as ranked by existing fleet size, are currently part of four alliance agreements.

In recent months, the industry has seen strong speculation that Chinese state-owned carriers China Shipping Container Lines (CSCL) and COSCO will merge while persistent rumours have linked Neptune Orient Lines (NOL) with a sale.

“If we drive cost down we will be able to live with low freight rates,” Skou stated, alluding to the rock-bottom rates on the Asia-Europe trade, which are struggling to pick up amidst conditions of industry overcapacity and low global demand.

He also conceded that the world’s biggest shipping line may have overestimated global growth forecasts when committing to investments several years ago.

“This year, demand growth is extremely weak, around 1.5% to 2%, much less than anticipated,” he added, “while capacity will grow around 7%. Coming into the year, we expected demand of 3% to 5%.”

“Global [economic] growth is very disappointing, and if we knew what we know today, maybe some of the [investment] decisions we did three years ago we wouldn’t have done or they would have been different,” Skou added.

Last week, the IMF reduced its global growth forecast for 2015 to 3.1%, the lowest rate of growth since the global financial crisis.