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            november 12, 2019

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Maersk Line Limited to end unprofitable transpacific loop


Maersk will close its TP5 US-flag service offered by American-crewed Maersk Line Limited ships from January 15 in a programme to eliminate unprofitable transpacific services.
Maersk Line Limited will also end its eastbound Taiwan Express slot-swap agreement with Evergreen on December 31, reports Newark's Journal of Commerce.
The termination of five older panamax containerships running from north Asia to Los Angeles is not a big cutback in the glut of transpacific TEU capacity.
The five vessels are old 4,300-TEU Sea-Land ships and one is chartered from Maersk's 2M alliance partner, the Mediterranean Shipping Co (MSC).
The termination will significantly reduce Maersk Line's existing service capacity to North Asia. It plans to fill the void in part by covering ports in the region with calls made by the new 2M Alliance.
Maersk Line will begin a new TP5 service with reduced capacity covering Yokohama and Busan on January 16. It also plans to offset the cut in US-flag capacity by buying slots on APL's US-flag services to those markets.
Klaus Rud Sejling, head of Maersk east-west trades, declined to say whether Maersk Line is making money in the transpacific, but did say overcapacity has led to "loss-giving" rates on long-term contracts and "very challenging" profits on inland business.
Although transpacific spot rates have held up better than in the Asia-Europe rates, much of Maersk's business is under long-term contract, the proceeds of which Mr Sejling found "completely unacceptable."
The average freight rate for shipping an FEU from Asia to the west coast under annual contracts was said to be well below the US$2,000 break even point.

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