Friday, December 16, 2016

Shipping: "Maersk's Rose-Tinted 2017"

From Bloomberg Gadfly, Dec. 13, 2016:
For many folks, 2016 has been a year to forget, and the shipping industry is no exception.

But looking ahead A.P. Moller-Maersk A/S is determined to put a positive spin on things -- maybe too positive.

On Tuesday chief executive Soren Skou updated investors on the Danish's conglomerate's new strategy, which involves separating its energy activities from the transport and logistics businesses, so it can focus on the latter.

His aim is to grow the transport business, but right now the separation plan looks a little odd: Maersk's profitable oil business stands to benefit from a rally in oil prices, triggered by an OPEC deal to curb global inventories.

Plenty of Ports
Maersk expects container terminal capacity to expand faster than demand...
... In contrast, the container shipping business is set to make a loss this year due to a surplus of new ships that has caused global shipping rates to tumble. (Since 2012 Maersk Line's average freight rate has declined almost 12 percent a year). 

So it's hard to escape the feeling that Skou's betting the ranch on an industry whose performance has lately been abysmal and whose prospects look pretty modest at best.

True, Maersk Line's cost-cutting zeal has helped it weather the storm pretty well -- it's losing less money than its rivals, which is something....MORE