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Shipping giant looks to China to combat downturn

By Anna Stewart and Max Foster, CNN
updated 5:43 AM EST, Fri February 1, 2013
STORY HIGHLIGHTS
  • Last year Maersk downgraded its growth estimates from 4% to 3%
  • By 2020 the shipping company hopes to increase its oil production by 50%
  • This year Maersk Line will launch the first mega-ship into its fleet -- the Triple E vessel

(CNN) -- Maersk Line, the container division of AP Moller Maersk, holds 16% share of the world's seaborne freight business and is regarded as a barometer of global trade.

Last year, the company downgraded its growth estimates from 4% to 3% as the global economic downturn and an oversupply of vessels hit the industry. It was indicative of industry-wide problems. "Shipping is a tough area to be in at the moment," group chief executive Nils S. Andersen told CNN. "We make money, but not a lot."

So, the company is looking to diversify. "What we're doing now is trying to build up a set of parallel activities with equal importance, with the oil company being the most established and largest activity we have outside shipping," he said.

Investment will be increased in the oil, drilling and port divisions, areas which have proven to have stronger growth and profit potential.

By 2020 the company hopes to increase its oil production by 50%, which translates into an extra 400 000 barrels per day.

Meanwhile, the Maersk Line division will focus on the frontiers of growth, in particular China, a market Andersen has dubbed "the most dynamic trade development in the world."

A rise in domestic consumption in China has led to an increase in their imports and Andersen sees this as a key opportunity.

"We see exports out of Europe growing quite rapidly to China, and the same goes for the U.S.," said Andersen. "It could be branded products, food stuff, or even raw materials for production -- more and more finished products go to China."

Andersen also pointed to the company's move toward mega-ships. The first Triple E vessel, made in Korea, will be introduced this year.

"It's going to be four hundred meters long and will be able to carry 18,000 containers. It's by far the largest vessels in the container trade," Andersen said.

Maersk Line have ordered ten of the $190 million ships, a hefty investment in the short-term. However, in the long-term

Andersen hopes the ships will lower costs.

"I'd say the most exciting part of it may not even be the scale, but the fact that we will be able to transport containers from Asia to Europe with far less fuel." Andersen noted fuel consumption could be cut by 30% to 50%.

By reducing the company's fuel costs and refocusing investment in the oil and gas divisions, AP Moller Maesrk hopes for a future with less volatility and calmer seas.

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