Charter tonnage solves Maersk’s cargo logjam

Maersk Line expects business to return to normal by the first quarter of next year. Credit: Dietmar Hasenpusch
Maersk Line expects business to return to normal by the first quarter of next year. Credit: Dietmar Hasenpusch

The fallout from the NotPetya virus attack in the summer has seen Maersk Line increase its chartering of vessels in order to free up bottlenecks caused by the cyber attack.

The Danish operator’s third-quarter results have revealed a nearly 20% increase in the number of ships chartered, from 325 in the third quarter of 2016 to 383 in the same period this year.

Chief commercial officer Vincent Clerc in an interview with IHS Markit said that the vessels were chartered over a short period in order to clear the bottlenecks following the attack on Maersk’s systems in June this year.

“The cyber attack made it necessary to invest in chartered tonnage to help to fluidify the network. There were bottlenecks in certain areas so we had to hire extra capacity to help with the movement of cargo,” explained Clerc. “These were “short-term charters through the course of the [third] quarter and we are still using some of that tonnage to re-position empties, but they are gradually being phased out,” he added.

In addition to the cyber attack, which left cargo on the quayside and empties needing repositioning, Clerc said that demand, which had been expected to be between 2 and 4%, actually achieved higher-than-expected levels at 4 to 5%, meaning there was more cargo than expected.

“We are trying to maintain a disciplined approach to capital expenditure, but as we see spikes or needs for extra capacity we will go for the flexible options – chartering – rather than investing in a vessel for a 25-year period,” said Clerc.

Maersk expects that the first quarter of next year will see a return to ‘normal’ operations following the NotPetya attack as chartered vessels are gradually returned to owners and empty equipment is repositioned.

Clerc admitted that the NotPetya attack had caught the company with “certain parts of the estate not sufficiently protected”, although he would not be specific about which parts were vulnerable. He added that parts of the system, such as Damco, were “heavily impacted” by the attack because it sells itself through having high visibility and being open to customers, which meant it was more open to the effects.

Moreover, the executive maintained that the NotPetya bug was “a day-zero virus” so the means to control it were developed as the attack was taking place, and he maintained that all the patches from Microsoft were in place.

Neither Damco nor the terminals that were also hit hard, along with Maersk Line, were the weak links. Clerc explained that terminals such as Rotterdam, APM Terminal’s most mechanised facility, was also badly affected because it was simply “not built for manual operations”.

Since the NotPetya attack was brought under control, Maersk has set about analysing and improving the company’s defences, but Maersk said, with the chances of a further attack following an initial strike at 90%, the company is not keen on disclosing too much about its new defensive system.

Vincent Clerc. Credit: Maersk Line

Nevertheless, Clerc did say that Maersk was aiming to solve the problem in three ways. “In the first instance we will build the wall higher to make it more difficult to get over, then we will isolate the estate into smaller parts so that any virus can be contained, and lastly we are putting the processes in place that will allow us to restore services faster following an attack.”

Compartmentalising the estate is not a new idea, with aircraft builder Airbus having arrived at this solution some years ago following the hacking of an entertainment system on one of its aircraft by IT students. Airbus then decided that the hackers could not necessarily be detained, but they could be contained.

In addition, Clerc explained that the “cyber attack had played out behind the plan on volumes”, and the headhaul volumes were ahead of expectations due to the greater than expected growth of 4-5%, but that was more than offset by the decline in backhaul volumes of 8.8%.

Even so, Maersk believes that it will regain its leadership in profits by the first quarter of 2018, and it is planning for further growth, as are other lines, with previously idle tonnage now being reactivated.

Clerc said that earlier this year these vessels – with a combined total of 1 million teu – remained idle, but over the last quarter 600,000 teu of this tonnage, a further 3% of the global fleet, has been reactivated. He would not be drawn on how much of this total belonged to Maersk.

In keeping with the expected global trade growth, the container trades are also expected to continue to expand into the new year and Maersk will continue to develop the tonnage on its Asia-Europe strings to handle for the growth.

In total, Maersk Line will have taken delivery of 20 new vessels over the course of this year and next year, totalling 363,562 teu. Eleven of these ships will be the second-generation Triple-E vessels with a capacity of 20,568 teu and five 15,282 teu ships; four 15,226 teu will also be deployed.

The 11 Triple-E vessels will be deployed on the AE1 route from Ningbo and Shanghai to North Europe via Malaysia and Sri Lanka; the AE2 from Xingang and Qingdao to Algeciras and North Europe via South Korea and Malaysia; the AE5 from North China ports in Xingang and Qingdao via South Korea, central and southern China to Malaysia, the Mediterranean, Bremerhaven, and on to Hamburg, Denmark, and Sweden; and finally the AE10, which originates in Dalian with calls in South Korea, central and southern China, Malaysia Egypt North Europe, and Gdansk in Poland.

Vessels displaced by these larger ships will be “cascaded like dominoes”, according to Clerc, to other services, adding capacity until either a chartered vessel is returned to owners or extra vessels are added to the more minor services.

A similar situation will occur with the deployment of the two 15,000 teu vessel types, which will be used on the AE15 and AE20 strings between Asia and Europe. The AE15 operates between Dalian in North China and Barcelona, while the AE20 links Qingdao, North China, with Piraeus, Greece.

In addition to the newbuildings, Maersk Line will acquire 109 vessels of a variety of sizes, between 600 and 10,600 teu that currently operate between Europe and South America and the United States. However, only 13 of these ships were built more than 10 years ago.

Further additions are expected through Maersk’s alliance partners; MSC, which has ordered 11 vessels of 22,000 teu from Samsung Heavy Industries and Daewoo Shipbuilding and Marine Engineering (DSME).

The two carriers, MSC and Maersk, make up the 2M alliance and that body has entered into a vessel sharing agreement (VSA) with the South Korean carrier Hyundai Merchant Marine (HMM), which will run until 2020.

IHS Markit reported on 8 November that HMM is contemplating an order for 12 ultra large container ships from DSME, but Clerc said there had been no discussions as yet over how the VSA would progress from the initial stages.

“The VSA with HMM has just come into force so we don’t know exactly what will happen,” said Clerc, but he added that they had ambitions to upgrade their fleet.

He could not say if there were plans to extend the VSA after 2020 or for HMM to become a full member of the alliance.