Q&A with Soren Skou, Chief Executive of A.P. Moeller-Maersk A/S, after the Danish shipping and oil giant reported its third quarter profit plunged 43%.
Q: Industry recovery is dependent on freight rates, and freight rates have been at record lows. When will freight rates recover?
Soren Skou: I never predict freight rates, nobody can do that. What I can say is that freight rates bottomed out at the end of first quarter. Spot rates out of China reached their lowest levels in March, and now they have almost doubled. The trend accelerated in the third quarter with the demise of Hanjin [Shipping Co.]. From the second quarter to the third quarter, we have seen a general rise in rates of 5.5% and we see the trend continuing in the fourth quarter
Q: Your container volume rose 11% in the quarter, much faster than your competitors. Is your strategy to grow share as quickly as you can so you can dominate the industry when freight rates recover?
Mr. Skou: Our priority has always been to have the lowest cost so we can be comfortable with weak freight rates. A big part of having the lowest cost is maintaining the largest network and this means growing market share.
Q: What is the effect of consolidation in the shipping industry?
Mr. Skou: Nobody could have expected how fast it’s happening. It’s dramatic change. In 1996, the top three carriers had 17% combined market share. By next year, the top three carriers will have 43% market share, and it’s not going to stop there.
Q: What oil price can you live with?
Mr. Skou: Predicting oil prices is anyone’s guess. Maersk Oil has done a great job bringing down its cost and bringing the break-even point to $40 per barrel and making a good profit with today’s prices. We don’t need $60 or $65 to be comfortable. We are making money with today’s oil price.
Source: Wall Street Journal