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Supply Chain

Container Rates Drop To Unsustainable Levels, Maersk CEO Says

By Reuters
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Container Rates Drop To Unsustainable Levels, Maersk CEO Says

The global container shipping market faces overcapacity in the coming years and the rates paid by customers have fallen to an unsustainable level, Maersk CEO Vincent Clerc has told the group's annual meeting of shareholders.

Maersk last month warned that container shipping overcapacity would hit profits this year, in contrast to the record earnings achieved in the wake of the pandemic.

"Freight rates have fallen significantly since the good years of 2021 and 2022, and have fallen actually to an unsustainable level," Clerc said.

Oversupply Of Ships

German rival Hapag-Lloyd separately on Thursday said the global oversupply of container ships and the crisis in the Red Sea will force it to cut costs in 2024, adapting sailings and ports following an 83% fall in net profit.

Container rates jumped in December and early January as vessel attacks in the Red Sea forced companies to redirect ships away from the Suez Canal to a much longer journey around Africa, but have since faded as available capacity still exceeds demand.

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An influx of new container ships last year added 9% to the industry's global capacity, which is expected to increase by another 11% this year and a further 7% in 2025, Maersk said.

In contrast, Maersk's fleet has remained constant in size in the same period.

Offsetting Overcapacity

"Demand growth, slow-steaming, ship recycling will have to offset over time this overcapacity so that we can get back to a healthy earnings level," Clerc said.

Maersk, which last year announced it would cut 10,000 jobs, told the AGM it would continue to focus on keeping costs in check.

The company's policy of paying a dividend to shareholders of 30% to 50% of underlying net earnings remains in place, board Chair Robert Maersk Uggla said.

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