Maersk Considers Splitting Business Units

AP Moller-Maersk, the world’s largest container shipping company, is considering splitting into five separate business units. In addition to its container shipping operations, Maersk owns oil tankers, port terminals, drilling platforms, and offers maritime services. While various cost-cutting measures are already underway, the company believes a structural split is necessary to remain financially sustainable in the long term.

Collapse in Sea Freight Rates

Maersk’s stock price has declined since 2007, even before the global financial crisis. The company was hit hard in recent years by the sharp drop in oil prices. In Scandinavia, Maersk faces declining demand for drilling rigs, prompting it to sell stakes in banks and supermarkets in Denmark to raise operating capital. Additionally, sea freight rates have plummeted, resulting in a net loss in Q4 2015.

Historically Low Container Rates

Global trade has weakened, leading to overcapacity in container shipping. Ocean freight rates—the cost of transporting containers by sea—are at historic lows, especially on routes such as Asia–Europe. Due to intense competition, carriers must now combat overcapacity to stabilize the market.

Industry Response: Alliances and Consolidation

Shipping companies are responding through:

• Mergers (e.g. Cosco and CSCL forming China Cosco Shipping)

• Acquisitions (e.g. CMA CGM acquiring APL)

• Strategic alliances

Today, the global container market is dominated by three major alliances:

• 2M Alliance

• Ocean Alliance

• THE Alliance

Each controls roughly one-third of the global container shipping market.