Container rates sink to unsustainable levels — Maersk CEO

  • Container rates have sunk to unsustainable levels due to overcapacity, according to Maersk CEO Vincent Clerc
  • New container ships added 9% to global capacity in 2023, with another 11% expected this year
  • Solution is seen in demand growth, slow-steaming, and ship recycling

Container rates have sunk to unsustainable levels due to overcapacity, Maersk CEO Vincent Clerc said in the group’s annual stockholders meeting held recently.

A report from Reuters quoted Clerc as saying the rates paid by customers had reached an “unsustainable level.”

New container ships in 2023 added 9% to the industry’s global capacity, with another 11% expected this year, the company said.

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

Another 7% in capacity is expected in 2025.

The Maersk CEO said: “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.”

Last year, Maersk said it would cut 10,000 jobs and will continue to focus on keeping costs low. The company, however, intends to maintain its policy of paying a dividend to stockholders of between 30 and 50% of underlying net earnings.

The report said container rates have slipped after the surge experienced late last year to early this year. This came as attacks on ships plying the Red Sea forced companies to use alternate routes away from the Suez Canal.

The alternate route is a much longer journey around the Cape of Good Hope in Africa, sending costs soaring.

Maersk’s shipping rival Hapag-Lloyd said the oversupply of container ships and the crisis in the Red Sea will force it to cut costs this year and reduce sailings.

The German company’s net profit tanked 83% in 2023 from a year earlier.

It said it would save on the procurement side and adjust services.

The forecast for 2024 is uncertain given the volatile development of freight rates and geopolitical challenges, Hapag-Lloyd said.