Some container lines may go under

Container shipping faces a long recession that will force some lines out of business, AP Moller-Maersk chief executive Nils Andersen predicted. He cast doubt on whether urgently-needed consolidation could be achieved, given the character of the industry.

Despite suffering the worst-ever set of quarterly results from its container shipping activities, AP Moller-Maersk would consider acquisition opportunities that may arise, Andersen said. “If there is a chance to expand at the right price then yes, maybe, we would look at that,” he said.

The whole industry would benefit from a further round of rationalisation, Andersen continued, but reducing the number of lines would not be easy. Lines such as Maersk have first hand experience of the problems of integrating other carriers, with the takeover of P&O Nedlloyd a few years ago providing competitors with a chance to expand their market share during the amalgamation process by tempting customers away with lower prices.

“Consolidators get punished at the outset,” Andersen said in reference to those difficulties of absorbing another line in a particularly cut-throat industry. Nevertheless, cheap assets in the form of companies or ships could come available if, as is widely anticipated, some businesses go under. With so much surplus capacity, “a number of players will not survive,” Andersen said, without speculating on whether any global carriers were at risk.

Restoring containership supply and demand to balance is likely to take years, he said.

“We are not optimistic about the earnings potential for container shipping in the short- to mid-term.” He refused to blame any single group, such as the banks, for the driving container shipping deep into the red. “We’ve all been to optimistic, some less than others maybe, but there’s been a very bullish view of the future,” said Andersen, who took over the top job in late 2007 after the huge ordering boom had peaked.

He went on to criticise risk assessments that had “not been well done”. But despite the massive losses notched up by the world’s largest line, Andersen said the group remained committed to container shipping, and determined to be the number one in terms of quality and, “hopefully”, profitability. Whether Maersk Line also stays in the top spot when measured by ship capacity depends partly on what the competition does, “and what we find financially sensible”, said Andersen.

Mediterranean Shipping Co has been narrowing the gap with Maersk as it continues to expand its fleet, but Andersen was adamant that the Danish line would not start chartering ships at cheap rates when there is already so much surplus capacity.

“We are not going to do illogical things to defend our number one position,” he said.

What mattered more was the company’s reputation and ability to offer quality services at competitive prices, Andersen said.