The world’s biggest container-ship operator is altering course, slashing jobs and cancelling or delaying orders for new vessels after years weathering a sharp downturn in the container-shipping market.
Danish conglomerate A.P Moller-Maersk A/S said its Maersk Line container-shipping unit would cut 4,000 jobs from its land-based staff of 23,000.
It is also cancelling options to buy six Triple-E vessels, the world’s largest container ships, to cope with the deepest market slump in the industry since the 2009 global financial crisis. Maersk said it would also push back plans to purchase eight slightly smaller vessels.
The decision to halt its fleet expansion represents a significant U-turn for the company, which had been investing heavily amid the downturn. Counting on its market-share dominance and deep pockets, it aimed to expand as smaller competitors retrenched.
But after issuing a surprise profit warning last month, Maersk signalled it, too, was no longer immune to a combination of slowing global growth and massive container ship overcapacity on many routes.
The conglomerate said it would cut its annual administration costs by $250 million over the next two years and would cancel 35 scheduled voyages in the fourth quarter. That is on top of four regularly scheduled sailings it cancelled earlier in the year.
Maersk has already ordered 27 vessels this year, including 11 Triple-E behemoths, which can carry in excess of 19,000 containers.
“Given weaker-than-expected demand, this will be enough for us to grow in line with our ambitions over the next three years or so,” said Maersk Line Chief Executive Søren Skou.
The Triple-E orders were placed at South Korean yard Daewoo Shipbuilding & Marine Engineering Co., and included a nonbinding option to order six more ships. Maersk officials said that under the terms of the deal, the Danish company isn’t subject to any damages for cancelling the option.
Although such options aren’t included in the order books of shipbuilders until they become solid orders, a move like Maersk’s represents a psychological blow for the global shipbuilding industry as well. Ships like the Triple-E go for more than $150 million each, and orders for them have helped cushion the blow for dwindling orders for other ship types.
In recent months, for instance, yards have suffered dozens of order cancellations for dry-bulk carriers and offshore drilling vessels. Those two shipbuilding markets have been hit hard by slowing global demand for commodities and weaker oil prices, respectively.
Maersk Line is the world’s biggest container operator in terms of capacity. The job reductions announced Wednesday will be completed by the end of 2017.
