Maersk yet to decide on 14,000 TEU boxship option

DANISH container shipping giant Maersk Line is yet to decide whether to order additional eight 14,000 TEU (Twentyfoot Equivalent Unit) containerships at Hyundai Heavy Industries (HHI).

In July Maersk signed a $1.1 billion new building contract with HHI for nine vessels with a capacity of 14,000 TEU each. The agreement includes an option for up to eight additional vessels.

Maersk Line’s senior press officer, Michael Christian Storgaard said: “What I can say is that we have not – at this stage – decided as to whether or not we want the vessels. Should we decide that we want the vessels they will be Tier II compliant,”

The reports on the exercise of the option come in the wake of Maersk’s cutting of expectations for Maersk Line’s business results for 2015 amid depressed market and plummeting freight rates.

According to the Chief Executive Officer of Maersk Group, Nils Andersen, the container shipping industry needs better freight rates so as to be able to recover.

He said: “In terms of the contract base, of course this is unfortunate, because the low rates coincide with the renegotiation of contracts. I would, however, like to say that this is not the first time we have experienced that, so I wouldn’t overemphasize its importance. It is an irritant, but we will have to overcome it. Of course, the industry needs better rates for 2016,” said Andersen, commenting on the impact of the freight rates on the company’s business results.
Maersk, recently lowered its expectations for Maersk Line’s business results for the year 2015 amid depressed market.

The previous expectation, as announced in the quarter two report was based on an underlying result contribution from Maersk Line above $ 2.2billion.

However, this has now been reduced to $1.6billion: “The group’s sensitivity guidance for the last six months of 2015 states that a general decline in the freight rate of  $100 FFE will impact Maersk Line’s result negatively by around $ 0.5billion and that a volume reduction of 100,000 FFE will have a negative impact of around $0.1billion,” Maersk said in an announcement.
Nevertheless, Maersk said that all other business units maintain their result guidance for 2015.
“It is regrettable that we have to adjust our expectations for the 2015 result. All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries,” says Maersk Group Chief Executive Officer, Nils S. Andersen.

According to the BBC, the group’s preliminary reported result for Q3 is $778m (USD 1,5b) with an underlying result of $1.3billion). The preliminary reported result for the first nine months is $ 3,436m (USD 5b) with an underlying result of USD 3,080m (USD 3,7bn).

Maersk attributed the downturn to deterioration of the container shipping market beyond the group’s expectations especially in the later part of Q3 and October, which are not expected to rebound in 2015.
“Maersk Line has over the years taken steps to ensure a cost effective and resilient operation, but the current deterioration in the container shipping market is impacting also our business,” says Andersen.

In Q3 Maersk Line achieved an average freight rate of 2,163 USD/FFE (2,679 USD/FFE in Q3 2014) and carried 2,427,000 FFE (2,401,000 FFE in Q3 2014), which were lower than expected.
“As a result of the market circumstances, initiatives have been taken to adjust Maersk Line’s network accordingly,” the announcement, reads.