EU: Maersk rate rise adds to mothballing ships for profit

Europe’s largest container lines are making an attempt to increase Asia-Europe rates to more than break-even levels and restore profit before year-end. Capacity cuts may boost their chance of success. A.P. Moeller-Maersk A/S (MAERSKB)’s container line, the world’s largest, and Hapag-Lloyd AG, Europe’s No. 4 line, have announced a $500 per-standard-container rate increase from Asia to Europe starting Nov. 1. France’s CMA CGM SA, Europe’s No. 3 container company, will also increase Asia to Europe rates by $500 on that date, while Hong Kong’s Orient Overseas International Ltd. (316) has announced a rise of $525 per box.

Container lines are losing money on routes from Asia to Europe because of an overcapacity of ships and slumping demand due to the European debt crisis. That’s made it difficult for carriers to raise prices on the televisions, T-shirts and shoes they ship from China to such ports as Hamburg and Rotterdam. While efforts to increase prices in March restored profits, rates have since slumped to below break-even levels. “This will be a major trigger for Maersk and other container share prices,” Frode Moerkedal, an analyst at RS Platou Markets AS in Oslo, said in a phone interview. “Utilization should improve and support higher rates.”

Container carriers such as Maersk Line, Hapag-Lloyd and Hanjin Shipping Co. have announced the removal of capacity of more than 30,000 standard containers between Asia and Europe in recent weeks. Coupled with the planned Nov. 1 rate hike, that may allow Maersk Line to achieve the full-year profit it forecasts for the year and help offset rising fuel prices in an industry in which all major container lines lost money in 2011.

Source: www.businessweek.com