Maersk, Biggest Competitors to Share Container Ships

[Neptune]

A.P. Moeller-Maersk A/S's container shipping line, the world's largest, will begin sharing vessels with its two biggest rivals on some North American routes as slowing U.S. economic growth reduces shipments.

Maersk Line will share three routes between Asia and North America with Mediterranean Shipping Co. and CMA CGM SA starting in April, the Copenhagen-based company said late yesterday. Each partner will provide most of the ships on a route, with the other companies allowed to book space on the vessels.

The U.S. economy expanded at a 0.6 percent annual pace in the fourth quarter, with a gain in exports preventing an overall contraction amid a domestic-spending drop, a Commerce Department report showed Feb. 28. Shipping routes serving the U.S. are the only ones worldwide that won't experience growth this year, Maersk Line Chief Executive Officer Eivind Kolding said Jan. 8.

``This deal illustrates just how much pressure the container lines are under for the American routes, as they also are hurt by higher fuel costs,'' said Jacob Pedersen, an analyst at Aabenraa, Denmark-based Sydbank A/S with a ``neutral'' recommendation on A.P. Moeller-Maersk stock. ``It's not normal for market-leader Maersk to enter such agreements, so this shows how far they are willing go.''

Line's 2006 Loss

The company, which owns 500 vessels that carry 1.7 million containers, is implementing the biggest cost-saving plan in its 103-year history after the shipping unit posted a 2006 loss stemming from a drop in the rates charged for carrying cargo.

Earnings recovered in 2007 as rates increased, with parent company A.P. Moeller-Maersk's third-quarter net income rising 44 percent from a year earlier to $1.04 billion and Maersk Line posting profit of $193 million versus a $91 million loss. The company, which also owns Scandinavia's second-largest producer of crude oil, is scheduled to report 2007 earnings on March 13.

A.P. Moeller-Maersk dropped 1,500 kroner, or 2.9 percent, to 50.900 kroner in Copenhagen trading yesterday. The stock is down 6.4 percent this year, valuing the company, Denmark's biggest, at 224.2 billion kroner ($45.7 billion).

The new routes will link the California ports of Los Angeles, Long Beach and Oakland with Chinese, Japanese and South Korean terminals, including Shanghai and Hong Kong, Maersk Line said. They replace Maersk's TP5 and TP8 routes, Mediterranean Shipping's New Orient Express and CMA's Yang Tse service.

Vessel Assignments

Maersk Line will deploy four vessels with a capacity of 8,000 containers, or TEU, and five half that size on the routes. Mediterranean Shipping, the world's second largest container shipper, will provide four 8,000-TEU vessels, while third-ranked CMA will contribute two 8,000-TEU ships.

The partnership with Geneva-based Mediterranean Shipping and Marseille, France-based CMA will ``address our cost structure'' without ``adding any capacity on the market,'' Vincent Clerc, a Maersk spokesman, said in the statement.

``It's a sound and sensible way of reducing costs, and deals like this confirm my view that the container sector won't suffer too much from a potential U.S. recession,'' said Pedersen of Sydbank. ``The question remains whether competition authorities in the long run will allow such big players to cooperate.''

Source Bloomberg