Maersk’s Investment in Super Ships Already Returns Value to Investors

Posted : 11/25/13 4:00

A jump in world trade in recent months has seen the profits of shipping giant Moeller-Maersk increase significantly, giving some much needed buoyancy to the recessive European stock market. The share price of AP Moeller-Maersk reached their best levels in four and a half years, as they announced that the profits from their Maersk Line subsidiary would exceed the $2.9 billion in profits of 2012. Forecasts are indicating that profits may be as high as $3.5 billion, with the increased earnings largely due to the increased efficiency of the E Class container ships that have come into full service in the past few months.The savings due to the economy of scale that is possible with these huge container ships has proven to have an almost immediate impact on operating costs. Coupled with the use of slower cruising speeds, aimed at achieving maximum fuel economy, Maersk have been able to make significant cuts to their operational costs, making them even more competitive in an already oversupplied market. The group already accounts for 15% of the world’s shipping, and with more of the super ships being delivered in the coming months, they look set to take an even larger slice of the market. With each E Class ship being able to carry between 16,000 and 20,000 containers, the full fleet they are building will potentially take the place of quite a large number of midsized vessels, and deliver greater economy through the reduced handling costs of loading and unloading a single ship, as opposed to a small fleet.It seems likely that when the full fleet of E Class container ships is in operation, the increased economy of scale will put downward pressure on prices in the already depressed sea freight market, making it much less viable for smaller to midsized ships to stay in operation. One obstacle that still needs to be overcome before these huge ships can dominate the seaways is the low number of intermodal ports that are equipped to handle them. In the short term at least, it seems that there will be room for smaller vessels, but as more port facilities are upgraded this will change. In the meantime, as Maersk continues to take delivery of its fleet of new super ships in the coming year, their stocks are sure to continue to deliver excellent returns to investors as their operational costs continue to reduce.