Maersk CEO apologizes for misdiagnosing market

TORONTO — In a recent letter to customers, Maersk Line CEO Eivind Kolding says shippers and ocean carriers alike are "experiencing an instant change in the market" which has led to volatility and made business-as-usual impossible.

"We realize that this abrupt change in market conditions has not been managed well by us in all instances, causing undue problems, for which we apologize," he writes.

"A particular challenge has been an extraordinary amount of overbookings on many of our sailings," he says, promising to find ways to alleviate the problems, which have caused "great inefficiencies for all of us."

In the letter, dated Feb. 15, 2010, Kolding says the sudden drop in freight volumes, starting in January 2009, and the resultant excess capacity drove rates down to an unsustainable level.  

Maersk issues mea culpa to customers;
Promises things are improving.

"Maersk Line, as most other liner companies, made great efforts to significantly reduce costs including capacity to get to a more stable and sustainable position to the benefit of all," he explains, adding that just when carriers made much-needed capacity adjustments, there was an unexpected surge in volumes.

He says the increase in volume was driven by inventory replenishment "in all industries and all geographies at the same time."

Kolding predicts the current market conditions will continue through the first quarter of 2010 and into the second quarter, as carriers are likely to be unwilling to "overcorrect" capacity adjustments.

"It should also be kept in mind that rate levels are yet only approaching break even levels and hence not compensatory," he writes. "For instance, in December they were 7 to 8 percent below December 2008 and nearly 20 percent lower than December 2007 excluding BAF."

Kolding’s letter promises that Maersk Line will honor its commitments and work with its clients to reduce the extreme volatility in the marketplace, and increase capacity with the growth in the market. 

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