Shipping struggling to recover

Nils Anderson expects his company will record a $2.8 billion loss for last year. Photo / Greg Bowker

The head of the world's biggest container line says shipping remains in the doldrums with profitability under pressure.

AP Moller-Maersk Group's chief executive Nils Andersen said cargo volumes are depressed after shipping companies lost between US$20 billion and US$30 billion collectively last year.

"The biggest issue last year wasn't the fact we had ships laid up and a decline in global trade, the biggest issue last year was that freight rates went down dramatically," he said.

Rates fell by around 30 per cent at their trough last June, although there has been some recovery since then.

"They're still not in a range where the lines can make a profit - it's realistic to assume the rates will go up still."

Andersen is in Auckland this week to view Maersk's operations and meet customers.

His own company was expecting losses of around US$2 billion ($2.8 billion) for last year.

"It's still tough, although we're seeing some increased activity in the last couple of months."

The United States and Western Europe had suffered dramatic falls in volumes but China and other developing economies, including India, were propping up global trade.

In the depths of the global crisis and plunge in commodity prices early last year hundreds of ships were laid up around the world amid fears that global trade could almost grind to a halt.

Maersk still has about 20 vessels laid up.

Andersen said the company has used the slowdown to fully review its business. Ships have slowed down to save fuel, service delivery has been reviewed, staff numbers trimmed and offices around the world have become more austere in the cost-cutting drive.

Maersk has during the past five years also achieved fuel savings of 15 per cent using exhaust heat recirculation, bigger ships where appropriate, new coatings on hulls and better communication between captains around the world.

"When there is an upswing, which we don't think will be immediately, then hopefully we will be well placed to profit from that."

Vessels were now cruising at 18 rather than 21 knots, which put more "air" into schedules and allowed them to arrive in harbour at the right time for more efficient working of the ships.

Maersk, with 500 container ships, has about 15 per cent of that trade. It also has 200 tankers, 100 drilling rigs and supply vessels and more than 500 tugs. It is expanding into the oil business in Denmark, Britain, Qatar, Algeria, Kazakhstan, Norway, Brazil and the Gulf of Mexico. It has not looked at opportunities in New Zealand. "Maybe one day."

It operates 12 ships to New Zealand and Andersen said he appreciated the line had a "big obligation to the country and the customers here and we expect to be able to improve the service in the future".