• Tuesday, July 16, 2024
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BusinessDay

Maersk sees stable but slower growth in regional demand amid drop in oil price

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Maersk Line, the Danish container shipping giant, says it has not seen major benefits from the fall in bunker and crude oil prices, and that its profit outlook is still being driven by global trade levels.

Lars Mikael Jensen, the company’s recently appointed Asia-Pacific chief executive, told ‘The Straits Times’ that Maersk Line expects stable but slower growth in regional demand.

“Our long-term contracts have a mechanism called bunker adjustment factor, which allows us to adjust our pricing depending on the rise and fall of bunker prices. This ensures mutual hedging and we’re not profiting from low fuel prices,” he said.

Oversupply has resulted in continuous fall of Brent, which is briefly touching a five and half year low at US$62 (S$81) a barrel, he said, noting that the lower fuel prices can benefit Maersk if it potentially stimulate economic and trade growth.

“Against this backdrop, the stronger growth in South-East Asia will be a key focus. Globally, we expect 3 percent to 5 percent growth in trade – still stable, but a far cry from the 8 percent to 10 percent of a decade ago. But South-East Asian trade with the world is likely to be higher than that average, at 6 percent to 7 percent going forward.”

However, he recognised that it will not be an easy task as industry players compete aggressively over pricing amid over-capacity and slowing global trade.

“Margins are indeed under pressure and freight rates have remained on a general downtrend. We are in the middle of the pack when it comes to regional market share – but we will not grow that by being dirt cheap but by operating efficiency, product range and ability to help global customers enter new territories in the emerging South-east Asia.”