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Maersk CEO Vincent Clerc tells customers of “challenging” months ahead for carriers and shippers

Maersk CEO Vincent Clerc has told customers during an online event that the next few months “will be challenging for carriers and businesses alike” given the current Red Sea security issues are expected to continue into Q3 2024.

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Like a number of other ocean carriers, Maersk is continuing to divert its ships around the Cape of Good Hope in South Africa, which Clerk has said is difficult for both carriers and shippers.

An acknowledgement of the difficulties shippers are experiencing

“We are faced with these challenges together and we need to make sure that we stay close to them as we handle the new set of circumstances that continues to unfold in front of us. These disruptions, and the impact they are having on your business, is not something that I, nor any colleagues at Maersk, take lightly. We know it is hard. We know it is difficult for you. We know it puts you under a lot of pressure,” said Vincent Clerc, CEO of A.P. Moller – Maersk.

Clerc added that the situation has extended rotations due to the longer route, necessitating two to three ships, depending on the trade in question.

An explanation for higher ocean freight rates

Maersk’s CEO then went on to claim that the availability of additional capacity was low to begin with and that carriers’ ability to bring in extra tonnage has been limited. Meanwhile, Clerk also claimed that this is all playing out at a time when demand for container transport has remained strong.

“Today, all ships that can sail and all ships that were previously not well utilised in other parts of the world have been redeployed to try to plug holes. It has alleviated part of the problem, but far from all the problem across the industry, including for Maersk. We are going to have in the coming month missing positions or ships that are sailing that are significant different size from what we normally would have on that string, which will also imply reduced ability for us to carry all the demand that there is,” said Clerc, as quoted on Maersk’s own website.

According to Clerc, since April and May, these difficulties have become more prominent.

The CEO of the Danish shipping giant also touched on the increase in operating costs that carriers are dealing with as a result of the longer journeys. Clerc told customers that this, as well as capacity being squeezed, had caused the price per container to rise significantly.

Maersk says it has “taken on these costs knowing that many of them will remain beyond the Red Sea situation”.

Offering an example as to why this is the case, Maersk states that its ships cannot be chartered for a few months to fill the current gaps. Instead, the company says carriers are having to sign up to several years at the higher charter rates.

In the opinion of Clerc, this is one factor bringing about a temporary increase in rates.

“The longer that this lasts, the more our costs will get deeply ingrained. We don’t know yet exactly how much of these costs we will recover and for how long. The higher rates we are seeing right now are of a temporary nature. We will see eventually that they go back to market as some of these problems get alleviated either by the new tonnage being phased in gradually or by us resuming normal sailing routes in the near future,” said Clerc.

When will Maersk’s vessels return to passing through Suez?

Vincent Clerc stressed during the online gathering that a return to Suez would not happen until the safety of seafarers, vessels, and cargo was guaranteed.

However, he added that once a resolution is found that addresses this, some ships could switch back to going through the Suez Canal almost immediately (although others would need to complete their journey around the Cape of Good Hope first).

In addition to this, Clerc warned that once Suez is deemed safe, there would be a period in which ships on different routes would arrive at various ports at similar times. This, as one would expect, shall cause a degree of port congestion until things eventually stabilise.

Pleas for stronger international presence in Red Sea “unsuccessful”

Finally, Maersk has confirmed that it has asked governments internationally for a stronger presence in the Red Sea / Gulf of Aden. Clerc stated that “this has been unsuccessful,” but added that businesses around the world can help by getting the message out about increased costs to their respective governments.

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