Wednesday, November 4, 2015

Container Shipping Lines Cut Services and Jobs as Trade Slows

Maersk to Shed 4000 Staff Over Two Years
Shipping News Feature
DENMARK – ASIA – Shipping conglomerate AP Moller Maersk has announced that its container shipping arm, Maersk Line, is to cut at least 4,000 jobs and scale back capacity as a way to defend its position as the world largest container shipping line, in response to worsening market conditions. The deteriorating market has already led to AP Moller Maersk adjusting its 2015 expectations downward by $600 million. Meanwhile the CKYHE Alliance (COSCO, K Line, Yang Ming, Hanjin Shipping & Evergreen) is to cancel 9 voyages on its current Asia-North Europe/Mediterranean service loops.

Maersk Line will reduce its network capacity and postpone investments in new capacity, while the same time reducing operating costs by escalating already announced plans to simplify the organisation. Over the next two years, Maersk Line expects to lower the annual Sales, General & Administration (SG&A) cost run-rate by $250 million with an impact of $150 million in 2016. SG&A savings will be derived from already initiated transformation projects and the standardisation, automation and digitalisation of processes.

The Danish giant will reduce its current 23,000 land based staff worldwide by at least 4,000 positions by the end of 2017 in the wake of the company’s digitisation and organisational transformation. Wherever possible the staff cuts will be made by a process of natural attrition. Maersk Line Chief Executive Søren Skou, said:

“We are on a journey to transform Maersk Line. We will make the organisation leaner and simpler. We want to improve our customer experience digitally and at the same time work as efficiently as possible. We are fewer people today than a year ago. We will be fewer next year and the following year. These decisions are not taken lightly, but they are necessary steps to transform our industry.”

As a response to the current market outlook, network capacity will be reduced in Q4 2015 and throughout 2016. The closure of four services - ME5, AE9, AE3 and TA4 - has already been initiated over the last two months and plans are in place to further cancel a total of 35 sailings in Q4.

Maersk Line will continue to manage capacity and does not plan to exercise previously announced options for six 19,630 TEU vessels on order from Daewoo Shipbuilding & Marine Engineering (DSME) of South Korea, and two 3,600 TEU feeders from the COSCO Shipyard in Zhoushan, China,and will postpone a decision on the optional eight 14,000 TEU vessels from Hyundai Heavy Industries (HHI).

Maersk Line, having cut anticipated profit for the year from a £2.2 billion+ profit forecast just a couple of months ago to $1.6 billion, has also cut four regular sailings earlier in the year also apparently plans to cancel 35 more voyages before the end of the year.

The CKYHE cuts are blamed on the usual winter downturn and were all scheduled between November 8 and December 13. Shippers and agents are advised to contact their own carrier’s local agent or visit the website of the relevant CKYHE line. Full details are:

Asia-North Europe Services

45th week, NE7 (ETA Ningbo, Nov.04); 46th week, NE8 (ETA Taipei, Nov.08); 48th week, NE7 (ETA Ningbo, Nov.25); 51st week, NE8, (ETA Taipei, Dec.13); 51st week, NE7, (ETA Ningbo, Dec.16)

Asia-Mediterranean Services

47th week, MD2 (ETA Xiamen, Nov.15); 48th week, ADR (ETA Qingdao, Nov.26); 49th week, MD2 (ETA Xiamen, Nov.29); 51st week, MD2 (ETA Xiamen, Dec.13)