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Low Asia-Europe box rates 'temporary' predicts Maersk boss Andersen

Low Asia-Europe box rates 'temporary' predicts Maersk boss Andersen
Maersk ceo Nils Andersen has cited the two new alliances, 2M and Ocean Three, the former of which it is a member, as the main driver behind the sharp drop in freight rates in Q2 on the Asia - Europe trade.

Average freight rates in Q2 dropped by 14.1% drop in Q2 driven primarily by the Asia - Europe trade, but Andersen expects rates to "normalise" in due course.

While better than generally expected, Maersk Line's bottom-line was hard-hit by the decline, dropping to $507m net profit in Q2 of 2015 compared to a $547m in Q2 2014 and significantly lower than a record $714m in first quarter 2015.

"We will look at capacity adjustments in the second half of 2015. We did not expect that we'd have a decline in Asia-Europe demand. Asia-Europe is where the largest increase in capacity has taken place combined with a drop in rates."

The company saw a drop in market share as a result of being "latecomers to the price war," Andersen explained. "However, we are confident that on a yearly level market share will be stable.

"We see [14.1% rate decrease] as temporary. We've seen two new alliances forming, which always inject capacity into the market. It's fair to assume some capacity will be reduced once capacity management gets underway - the situation will normalise."

Maersk now expects the liner market to grow by 2-4% in 2015, compared with a 3-5% growth in 2014. "It's very difficult to predict," said Andersen. "Personally I don't believe it really changes much whether growth is 2 or 4%. We need to take the correct capacity adjustments to suit the market.

"In general our short term options to reduce the fleet are limited. But we can lay-up vessels and blank sailings... we will be looking into that.The constant relocation of capacity is part of our job."

"What we intended by the new guidance is to make it clear that we don't intend to give up our market leading position, and that was a response to some very aggressive rate decreases.We're delivering a 10.1% ROIC, and we think that underlines that Maersk Line has really undergone a true, comprehensive restructuring and yes we've been participating in the rate decreases, but we are by no means the most aggressive."