John W. Miller/The Wall Street Journal - At about half speed, fuel consumption drops to 100-150 tons of fuel a day from 350 tons, saving as much as $5,000 an hour. "The strategy now is to slow steam as much as possible," said Christian Hagart, the Eugen's chief officer.
That strategy is a key element in plans by AP Moeller-Maersk AS to cut $1 billion in costs this year, scaling back on everything from fuel to paper napkins. Analysts say the cuts should keep the whole company out of the red in 2009, since Maersk's container unit is expected to lose between $1 billion and $2 billion.
Maersk's moves come as shipping companies are struggling to survive the worst collapse of global trade since World War II. Analysts predict that at least one of the world's 20 biggest shipping companies will go bust this year, caught by the global economy's sudden downturn as the industry was ramping up capacity. Global trade is expected to fall 9% in value this year, according to the World Trade Organization.
Other shipping companies are taking similar cost-cutting measures to Maersk's. CMA-CGM SA of Marseille, France, the world's third-biggest shipping company by sales, is slowing ships, canceling certain routes and ordering that new ships be made more fuel efficient.
At Maersk, the world's biggest shipping company, the situation is particularly stark. Though the Copenhagen-based company isn't at risk of going belly up, its container volume fell 12.8% last month from a year earlier.
"We cannot go on doing business as we have done," said Chief Executive Nils Andersen.
Maersk's $1 billion target in cost cuts is reachable in a company that reported $61.2 billion in revenue last year, said Henrik Lund, an analyst for Copenhagen-based Carnegie Bank A/S. Maersk's container business alone "consumes more oil than the state of Denmark," he said.
But the company, which also has retail, energy, logistics and other businesses, lost $8 million in the fourth quarter, down from a $708 million profit a year earlier. Meanwhile, industry shipping rates on key routes, such as between Asia and Europe, are down 69% from a year ago, according to Drewry Shipping Consultants Ltd.
Demand is so low on the Europe-to-Asia route, that when the Eugen steams back to Shanghai, she will add 5,500 miles to her journey, sailing around the Cape of Good Hope. Last year, Capt. Soren Hoppe would have cruised through the Suez Canal, saving two weeks of sailing time and fuel. But with customers scarce and bunker fuel costing a third what it did a year ago, the $600,000 the Eugen pays to pass through the canal no longer makes financial sense. If the price of oil returns to $130 a barrel, Maersk would again use the canal, company executives say. Asia still exports enough goods to Europe to merit the shorter, costlier route going the other way.
The Suez Canal Authority says traffic is down 20% this year and projects canal revenue will fall 20%-30% from last year's $4.5 billion. The authority says it plans to maintain rates through year-end.
Maersk also has to contend with 49 new ships on order, some of them the largest freighters the world has ever seen. Despite efforts to cancel or delay orders, the company has received 87 new vessels over the past two years. To adjust, Maersk plans to scrap 25 older vessels.
The Eugen Maersk is the world's longest ocean freighter at 1,300 feet. Her propeller shaft alone stretches 400 feet. The ship can handle up to 11,000 20-foot containers, known on board as "cans." While the Eugen typically wouldn't be quite full on her return to the North Sea, today she is carrying well under half her capacity, at the equivalent of 4,100 cans.
Capt. Hoppe ordered the sky-blue vessel to depart Rotterdam at noon, four hours early so he could steam more slowly than usual to the German port of Bremerhaven.
On board, the Eugen dims interior lighting, even on the basketball half court favored by the crew. Seaman Guillermo Ubaldo, who does odd jobs like mopping floors, shrugs his shoulders. "At least we still get to play sometimes."
In the dining salon, rolls of paper towels instead of paper napkins now grace the table where chief engineer Steen Viig eats breakfast and extols the life at sea. The shift to paper towels will save the company as much as $70,000 this year, Maersk says.
In Denmark, Maersk also is taking measures that would be familiar to other companies around the globe, canceling $3 million in Copenhagen office leases. Ordering executives to fly economy should save $30 million a year.
The Eugen arrives in Bremerhaven on schedule at 1 p.m. The next day she will steam toward the Atlantic Ocean, heading back for her slow cruise to Shanghai.
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