Global trade slows in blow to Maersk as further hit expected
A.P. Moller-Maersk — a bellwether for global trade — signalled weaker results for the rest of the year after reporting first-quarter operating profit that tumbled by more than half, with transport volumes slowing and freight rates plunging.
Maersk, which transports close to one-fifth of the world’s containers, warned that the first three months of 2023 “will be the best quarter of the financial year,” the Copenhagen-based company said in a statement on May 3. It expects global economic growth to remain “weak” at around 2% this year. There are “still a lot of clouds that we need to handle,” CEO Vincent Clerc said in an interview with
Bloomberg TV.
As business activity slows, companies seek to reduce inventories at warehouses rather than moving new goods from Asia to Europe and the US. That is a sharp turnaround from 2021 and 2022, when a spike in demand for consumer goods during the pandemic, coupled with supply-chain issues limiting vessel supply, led to record profits in the freight industry.
Maersk reported a 56% drop in earnings in the first quarter before interest, tax, depreciation and amortisation to US$3.97 billion ($5.27 billion). That compares with a median estimate of US$3.55 billion in a survey of analysts. Volumes declined 9.4% in the quarter, and freight rates fell 37% and are close to the break-even level, according to the CEO.
The shares fell as much as 3.2% and were down 1% at 11,915 kroner ($2,346) at 9.30am in Copenhagen trading. The decline pushed Maersk’s stock to its lowest level in a month. The shipping company repeated its forecast that the world’s container transport volumes might shrink as much as 2.5% this year. It also stuck to its full-year financial forecast of underlying ebitda of US$8 billion to US$11 billion, roughly a quarter of the 2022 figure.
Clerc indicated that the shipping industry needs to be disciplined on the capacity to avoid a more severe downturn and may have to idle more vessels later this year. “We’ve already seen a lot of capacity being blanked to match the lower volume demand,” he told Bloomberg TV. “There’s also some supply side risks in the form of new ships coming into service in the second part of the year and the next. This will create a new challenge for the industry.” —