Tuesday, May 26, 2009

Maersk Line well placed to ride out financial crisis

Maersk Line has worked upon enhancing its operational efficiency, driving costs out, improving profitability and simplifying its organisational structure, says its managing director

MAERSK Line, the world's largest container shipping line and a unit of Danish shipping group A.P. Moller-Maersk, said there continues to be considerable uncertainty about the future of the shipping industry for the rest of the year, due to the development in the global economy.

"These uncertainties relate to the development in container freight rates, transported volumes, the US dollar exchange rate and oil prices," Maersk Malaysia Sdn Bhd managing director Omar Shamsie told Business Times via email.

Maersk Line saw its cargo volume globally fall 14 per cent year-on-year in the first quarter of this year, due to a slowdown in trade activity amid the global economic crisis.

However, it managed to maintain its market share in the declining container shipping market.

Last year, Maersk Line posted flat growth in total cargo throughput at 6.2 million FFE (40-foot equivalent units).

"The market is really bad - no one has escaped the wrath of the global economic crisis. All companies have been hit to varying degrees and some have been better dressed than others to deal with it," said Omar.

Omar, however, said Maersk Line is better positioned than its competitors to ride out the current financial crisis, having embarked upon a shift in its strategy globally in early 2008.

"We had embarked upon the shift ahead of the crisis, where, among others, we have worked upon enhancing our operational efficiency, driving costs out, improving profitability and simplifying our organisational structure. This has allowed us to deal with the crisis from a sturdier footing," he said.

These initiatives to restore Maersk Line's profitability are starting to pay off.

"We have documented an increase in satisfied customers, we are number one on schedule reliability, our invoice quality has never been better and we have made significant cost savings on bunker.

"We are ahead of our competitors on many important areas. This forms a good platform to further strengthen Maersk Line's competitiveness," said Omar.

The shipping line has also re-worked and rationalised some of its services, where traffic has dropped.

At the same time, it has added and improved its services on main shipping routes such as the all-water service to the US East Coast, which was launched at the end of May 2008.

Maersk Line also saw its average freight rates drop 24 per cent in the first quarter of this year, from the same period in 2008.

The drop in freight rates is in tandem with the international market.

"Generally, freight rates across all trades have fallen to unprecedented levels. The current freight rates are simply unsustainable and must be restored back to levels where the industry can breathe and support trade efficiently. If not, we may see the demise of additional operators," warned Omar.

"Many shipping lines, including Maersk Line, have rationalised its services and additionally are currently pursuing rate restorations in various trades such as the Middle East, Europe and Oceania," he added.

He said Maersk Line's customers have, by and large, been supportive of its need to restore freight rates.

"They, too, appreciate that a status quo (in freight rates) would ultimately lead to the trade and end-users being impacted due to reduced services, capacity and frequency.

"We aim to maintain our position in the major markets we serve and will thus, work with our customers and responsibly try to turn the situation around through phased rate restorations," he said.

On the local front, Omar said container traffic to and from Malaysia and Singapore remains weak since the start of this year.

"Rates and consequently, our (Maersk Malaysia's) profitability have been negatively affected," said Omar, adding that it has not made any of its 200-odd staff across its five Malaysian offices redundant as a result of the crisis, as yet.

On his plans for Maersk Malaysia this year, Omar said it will work to restore its freight rates to and from Malaysia, keep its costs down and increase its operational efficiency, high service delivery and customer satisfaction.

"Winning in today's market place is about getting closer to the customer. This is more crucial then ever. We want to get closer to our customers, improve our service and boost our competitiveness," he said.

Source: BusinessTimes

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