Maersk closes Chile reefer factory

Date: Wednesday, June 20, 2018
Source: American Shipper

 Less than three years after it opened a factory in San Antonio, Chile to manufacture refrigerated shipping containers, Maersk Container Industry said is shutting it down immediately and consolidating production in China.
   The San Antonio factory opened in November 2015. Maersk said it had located it there to supply reefer containers directly into what it called “the export hub on the west coast of Latin America.”
   When the factory opened, Maersk Container Industry said, “In this sweet spot of fruit exporters, we have placed the factory right where the demand is. For the first time ever in South America, reefer containers can go straight ‘from factory to farm.’ Offering the Star Cool Integrated reefers locally to shipping lines, farmers, fruit distributors and leasing companies will have a financial benefit counted in thousands of dollars per reefer and millions for the industry in total.”
   But this week the company said the new factory has not worked out.
   “The reefer container market has changed fundamentally towards heavy overcapacity. At the same time, it has been challenging for Maersk Container Industry to develop a localized supply chain base of raw materials and key components to support its factory. As a result, manufacturing at the facility has shown not to be competitive in the global markets,” the company said.
    Sean Fitzgerald, chief executive officer of Maersk Container Industry, said, “The harsh reality is that to be competitive today requires us to adapt our operations constantly. Fundamental market factors have changed and so must we to grow with the market. Regrettably, this decision impacts our 1,209 skilled colleagues in San Antonio and we are committed to supporting them and honoring our obligations.”
   A Maersk representative said a small group of employees will be offered a temporary position to support the cease of operations.
   She added, “Demand for reefer containers increased in 2017 compared to the unprecedented low level in 2016, but was still below 2015 volumes. The demand for dry containers was above 2016. Generally, the ocean container manufacturing market for dry and reefer containers remains characterized by oversupply, and Maersk Container Industry expects this to continue for the foreseeable future.” 
   In 2017, 80 percent of the containers Maersk Container Industry made were for Maersk companies, including Hamburg-Sud, which it acquired last year.
   Maersk Container Industry’s factory for making reefer containers is in Qingdao, China. Maersk also has a factory in Dongguan, China for making dry containers. Maersk Container Industry produces reefer containers as well as cooling units, which it says offers customers the advantage to obtain both from a single source.
   “We will be able to suit market needs from our facility in Qingdao and do not plan to build a new factory. Starting production in 1998, MCI’s facility in Qingdao was MCI’s original reefer factory and under the changed market conditions it has proven competitive production of the volumes needed to suit market needs. At the factory, we are capable of making the full range of MCI’s refrigerated container and technology portfolio responding to the growing market demand from shipping carriers and leasing companies,” a Maersk representative said. She added container manufacturing “is part of the continuing businesses of A.P. Moller - Maersk.”
   Maersk had said when reporting its first-quarter earnings this year that its “reefer factories ran at full capacity in Q1 2018 with the production volume in the Chinese factory being on par with 2017 whereas the factory in Chile increased the output by 17 percent. Profitability on the dry containers were negatively impacted by higher material cost for steel. … Financially Maersk Container Industry reported a satisfactory revenue growth of 18 percent and an unchanged EBITDA margin of 11 percent.”
     Fitzgerald said, “After careful review, we concluded that the consolidation of activities at one plant will provide a strengthened capacity utilization and a simpler cost structure. This will in turn allow us to better serve our customers and focus on innovation responding to the growing demand for reefer container technology.”

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