Global leader ready to lose money to win market

A worker gets ready for the?docking?of?a Mary Maersk containe?ship?in Qingdao port, Shandong province, Sep 18, 2013. [Photo by Yu Fangping/Asianewsphoto]

The chief executive officer of the world's largest container line said he's willing to lose money in the short term in exchange for longer-term market dominance.

Maersk Line's decision to go for market share in an unprofitable third quarter might "seem strange", but "you need to consider the alternative", CEO Soren Skou said in a phone interview. "The industry is consolidating and in such a situation you have to make sure you keep growing so you don't lose your market-leading advantage."

"In the long term, the winners in this business will be those with the lowest costs, and low costs are achieved through scale," said Skou, who is also the CEO of Maersk Line's parent, Copenhagen-based AP Moller-Maersk A/S. "We want our market share to grow organically every year."

Maersk Line on Wednesday reported a third-quarter net operating loss after tax of $116 million compared with a profit by the same measure of $264 million a year earlier. Plunging freight rates outweighed a decline in unit costs.

The shipping line increased volumes by 11 percent in a quarter that only saw market growth of 1-2 percent.

The CEO said the 11 percent growth rate "might have been a bit more than we planned", but the August collapse of Hanjin Shipping Co "gave us a lot of volume".

Maersk Line has about 15.5 percent of the global container market, putting it ahead of Mediterranean Shipping Co's 13.4 percent and CMA CGM SA's 10.4 percent, according to Alphaliner.

Bloomberg