Maersk chief vows to fight rate undercutting
A.P. Moller – Maersk Group Chief Executive Nils Andersen has indicated the group's shipping unit, Maersk Line, will not allow rivals to steal market share in the depressed rate environment.
In an interview with Danish business newspaper Dagbladet B'rsen, Andersen said: “We will not allow anyone to take market share from us by systematically undercutting our prices. If it comes down to that we’re ready to fight it out on prices. We don’t go out and compete aggressively to gain market share, which we could, because we are probably financially stronger than most of our competitors. However, we don’t believe it serves a purpose in a market in which there is no money to be made fighting for market share and thereby hurting the market.”
The interview came after an earnings conference call with analysts and media on Friday, where Andersen described the group's first half financial position. Maersk Line lost $829 million in the first half, which led the group to post a $540 million loss during the first six months of 2009.
A spokesman for Maersk on Tuesday confirmed the report to American Shipper, saying it took place during an interview with B'rsen, and that it was in line with comments made earlier this year by Maersk Line CEO Eivind Kolding.
In early March, Kolding suggested in an interview with Reuters that market share wasn't so important when growth rates in container shipping were higher than 10 percent, but that in the current environment it is.
Asia/Europe is 'where we are relatively strong and it’s definitely where we want to keep our position whatever it takes,' he said.
He said preservation of market share on the Asia/Europe trade was especially important because that trade is best suited for the largest containerships in operation.
In the conference call Friday, Andersen made no mention of having to fight rate wars, though he did say the ocean carrier industry as a whole acted immaturely in response to the actions of some carriers who cut rates and that Maersk's pricing wasn't 'out of the range of the competition.”
Maersk's second quarter rates tumbled 34 percent compared to the second quarter of 2008, a fall higher than the industry average. But Andersen said the higher level of rate declines was due to substantially falling rates on the Asia/Europe lane — Maersk's core trade.
Despite Andersen's comments, Maersk has steadily progressed with a series of rate increase announcements in recent weeks covering virtually every trade in which it participates. Indeed Andersen's tone during the call with analysts on Friday indicated that restoring rates was one of the company's top priorities.
'The rates that are sticking are still not anywhere near what is an acceptable return,' he said.
It should also be noted that Andersen wasn’t likely to promote the idea of lowering rates to keep market share in a call with analysts who would have been concerned with the liner carrier’s first half performance — losses that were mostly attributable to already rock-bottom rates, given that Maersk Line’s volume in the first half only dipped 7 percent.