Building and rolling out the world’s largest container ships … twice … is a clear indicator of the role the Danish conglomerate has played as a catalyst for current overcapacity within the industry. Not maliciously of course, Maersk Line’s profitability grew from -$482 million in 2011 to $2.5 billion in 2014. Even as overcapacity grew, Maersk Line’s business was still soaring and the company saw no reason to slow down.
Even when Maersk’s profits drastically fell to $1.4 billion in 2015, the entire industry was still scrambling to order new ships. This is primarily because the cost of new ships was set to soar. Under IMO Tier III regulations, ships with keels laid from January 1, 2016 face costly emissions compliance mandates. The industry had a narrow window of time to build cheaper ships and wanted to take advantage.
While Maersk is now reaping the trouble that it sowed, opportunities lie ahead. However stressed the business may be, in the long haul Maersk can weather the storm better than most and can turn the current situation to its benefit. It’s telling that the newly separated Maersk Line’s primary goal isn’t increasing profitability. Instead, according to the WSJ, its primary goal is increasing market share through organic growth and acquisitions.
This isn’t a new strategy. Back in June 2015, Maersk CEO Nils Andersen told the WSJ that:
“it’s highly unlikely there will be an easy way to make a profit going forward for a small or midsize carrier.“
Maersk, of course, are big – and plan on getting bigger. While Nils Andersen was switched out by Soren Skou in mid-2016, Maersk is continuing this exact strategy. They have the deepest pockets and are willing to continue to push overcapacity, while taking years of loss, in order to eliminate competition and dominate in the long-term.