Maersk focuses on capacity management to curb costs

Maersk is trying to maintain a tricky balancing act of raising rates by reducing capacity while maintaining market share .

News ID: 80172

Date: 18 August 2018 - 11:24

MAERSK Line is to keep a sharp eye on capacity management as it seeks to improve efficiency in its network and improve earnings, particularly after the peak season ends.

“Our plan calls for very tight capacity management,” said chief operating office Søren Toft during Maersk’s second-quarter analyst briefing. “We can take it down during the slack season to support utilisation and prices.”

Capacity was down 2% in the second quarter, Mr Toft said. “Short term we want to reduce it even further. We haven’t seen the full effect of all the synergies of the inclusion of Hamburg Süd into Maersk Line.”

There would be a further improvement in the third quarter but over the mid-range Maersk estimates maintaining capacity of around 4m teu is sufficient to cater for the volumes it has and to provide stable capacity utilisation.

Maersk expects volume growth this year in the range of 2%-4% and will match capacity accordingly.

“We are growing slightly better than we expected, growing at slightly above market,” Mr Toft said. “We are performing better on customer retention than we had expected as a result of the integration of Hamburg Süd.”

These synergies would continue into the third quarter, he added, along with efforts to close down unprofitable trades.

“We expect that will continue to improve, but not to the extent where we would give up market share.”

But the company accepted it had more to do to increase freight rates.

“If you look at the first half ebitda, we need to do better in the second half to meet our expectation for the full year,” Mr Toft said. “Some of this has to come from cuts while some of it has to come from rates. Since April the SCFI has increased 20% and from its lowest point it is up close to 30%.”

Maersk has had success in reducing its unit costs since the integration with Hamburg Süd at the end of last year.

“The second quarter saw an improvement of nearly 6% over the first quarter in unit costs at fixed bunker prices,” Mr Toft said. “Over the second quarter there has been a cost increase but when we separate out Hamburg Süd and exchange rates there has been a year-on-year improvement of 1.4%. The capacity management we have done have helped us deliver improved efficiency.”