Maersk sees slight pick up in container traffic next year

A shift in focus from market share to lowering costs has helped Maersk improve its profit margins. (Reuters)
Updated 15 November 2019

Maersk sees slight pick up in container traffic next year

COPENHAGEN: Shipping group A.P. Moller-Maersk sees scope for a slight pick up in global seaborne container traffic in 2020 compared with this year, with ongoing trade tensions limiting the chances of stronger growth.

Maersk, the world’s biggest container shipper, said on Friday that it expected global container demand to grow by 1-3 percent next after compared with
1-2 percent in 2019.

“The continued weakening of global sentiment, above all in the manufacturing sector, reduces the likelihood of a growth pick-up in 2020,” the company said in
a statement.

Despite headwinds from the US-China trade war, Maersk last month raised its expectations for 2019 profit, prompting its shares to jump more than 7 percent.

The company on Friday published a full set of results for the July-to-September period, reaffirming that it is on track to improve its profit margin albeit on slightly lower revenue.

The pick-up in profitability is driven by capacity management and cost control, with unit costs — the cost of moving a container on global seas — down 3 percent in the third quarter.

“We will continue our focus on profitability and free cash flow in the fourth quarter and into 2020,” CEO Soren Skou said in a statement.

Maersk has in several quarters struggled to keep costs under control amid low freight rates, rising fuel prices and a slowdown in container shipping.

As Maersk shifts its focus from market share to lowering costs, it said it expected underlying growth in its ocean business to be slightly lower this year than average market growth.

Skou has overseen a major shift in Maersk’s strategy, announced in 2016, which has included selling off its oil and gas business to focus on its container and logistics business for customers including Walmart and Nike. 


LG Chem separates battery business as electric cars take off

Updated 18 September 2020

LG Chem separates battery business as electric cars take off

SEOUL: South Korea’s LG Chem, an electric car battery supplier for Tesla and GM, said that it plans to separate its battery business into a new company as the electric vehicle market takes off.

The move came after LG Chem swung to a profit in its car battery business in the latest quarter. It expects further profitability thanks to growing demand from European car makers and more sales of cylindrical batteries used in Tesla cars.

LG Chem, South Korea’s top petrochemicals maker, has long bet on car batteries as a new growth engine, but it has never made an annual profit in the business since it started making them about a decade ago.

But expectations are growing for its car battery business as automakers push for more electric vehicles, fueled by Tesla’s rise and tougher emissions regulations in Europe.

LG Chem said the timing was right to separate the business, which competes with China’s CATL and Japan’s Panasonic, as it has started to make “structural profits” in its car battery business.

LG Chem said the new business, to be launched in December, aims to achieve a revenue of 30 trillion won ($25.5 billion) or more in 2024, from an expected revenue of 13 trillion won this year.

The new wholly owned subsidiary, tentatively named “LG Energy Solutions,” will include LG Chem’s small batteries used in smartphones and laptops and its energy storage systems, as well as its car batteries. LG Chem shares slumped 5.4 percent.

“Many LG Chem investors will only indirectly hold the battery business, which will be separated into a unit,” Daeshin Securities analyst Han Sang-won said.

He also said that investors are also taking profits ahead of Tesla’s battery day, in which Tesla may unveil its advanced battery technologies.

LG Chem said it will consider a stock market listing of the battery unit, without elaborating further.

Making the unit an independent company would also help to attract investments to the business, which requires heavy capital expenditure to expand production capacity as orders pile up, LG Chem said.