Maersk sees stable but slower growth in regional demand

Container shipping giant Maersk Line has so far not seen major benefits from the fall in bunker and crude oil prices, and its profit outlook is still driven primarily by global trade levels.

The company’s recently appointed Asia-Pacific chief executive, Mr Lars Mikael Jensen, told The Straits Times that Maersk Line expects stable but slower growth in regional demand.

“Our long-term contracts have a mechanism called bunker adjustment factor, which allows us to adjust our pricing depending on the rise and fall of bunker prices. This ensures mutual hedging and we’re not profiting from low fuel prices,” he said in an interview.

Oversupply has seen Brent futures continue to plunge this year, briefly touching a 5½-year low at US$62 (S$81) a barrel last week.

But Mr Jensen noted the resultant cost savings are not major: “How the lower fuel prices can benefit us is that it will potentially stimulate economic and trade growth. We have yet to see that happen.”

Against this backdrop, the stronger growth in South-east Asia will be a key focus for Mr Jensen, who was appointed regional head in September.

He said: “Globally, we expect 3 to 5 per cent growth in trade – still stable, but a far cry from the 8 to 10 per cent, say, a decade ago. But South-east Asian trade with the world is likely to be higher than that average, at 6 to 7 per cent going forward. My ambition is to grow Maersk Line in the Asia-Pacific in tandem with that above-average trade growth.”

However, he recognised that it will not be an easy task as industry players compete aggressively over pricing amid over-capacity and slowing global trade.

“Margins are indeed under pressure and freight rates have remained on a general downtrend. We are only in the middle of the pack when it comes to regional market share – but we will not grow that by being dirt cheap. We will grow because of our operating efficiency, our product range and our ability to help global customers enter new territories in the emerging South-east Asia.”

In May this year, Maersk Line became the first container shipping company to set up an agency in Myanmar, after Danish parent AP Moller-Maersk Group won an operating licence there.

“The move is to be prepared to meet our customers’ need to develop business in Myanmar, where total containerised trade has already been growing steadily,” said Mr Jensen.

Meanwhile, Maersk Line remains highly committed to deepening its presence in Singapore, where its Asia-Pacific headquarters is located, even as it depends heavily on the Port of Tanjung Pelepas (PTP) in Johor.

The competition between PTP and Singapore to be the region’s premier port for global shipping operators has risen over the past decade after Maersk Line moved its transhipment hub from Singapore to PTP.

Still, he stressed that Singapore has not lost its competitiveness as a maritime hub, and certainly not for Maersk Line.

“The size of Maersk Line’s business requires a dual-hub model, but (PTP) doesn’t change the fact that Singapore is still an important transhipment hub and local gateway,” he said. “Today, Maersk Line and MCC Transport (Maersk’s intra-Asia shipping line) have more than 35 weekly vessel calls in Singapore and are one of the largest users of the PSA facilities in Singapore.”

“Combined with the 60 container vessels Maersk Line has under the Singapore flag – our second-most globally – this sums up the importance of Singapore to Maersk Line,” he said. 

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