Maersk cautions about reduced container shipping demand.

By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) – Shipping group A.P. Moller-Maersk warned on Friday of ‌a steeper decline in global demand for shipping ⁤containers by sea this year, prompted by muted economic growth and customers reducing inventories.

The company, one of the world’s biggest container shippers with a market share of around 17%, said it expects container ⁤volumes to fall by as much as 4%.⁣ It had previously forecast a decline of no more than 2.5%.

Maersk ‍transports ‍goods for retailers and consumer companies such as Walmart, Nike and Unilever, and is ‌seen as a barometer for global economic and corporate health.

CEO ⁤Vincent Clerc said he saw no sign that ‌the destocking ‌which⁣ has curbed global trade activity would end this year.

“We had expected customers to draw down inventories⁢ around the middle of‍ the year, but so far we see no signs⁣ of ⁢that happening. It may ⁣happen at the beginning of⁢ next year,” Clerc said at ⁣a media briefing.

“Consequently, the uptick in volumes we had expected in the second half of the year has not occurred,” he said.

He⁢ predicted that the drawdown of inventories would take‌ longer in the U.S. than in other regions.

Maersk posted⁢ record earnings last year due to high freight​ rates caused by strong consumer demand and pandemic-related logjams at ports. But freight rates have⁢ tumbled this year amid a global economic slowdown.

To make things worse for the industry, a wave of⁤ hundreds⁢ of new container vessels ordered during the pandemic has started to come to market​ this year.

“Most of the orders are still in the shipyard,⁣ so we have a long haul in front‌ of us,” said Clerc.

The industry has been disciplined in handling the new capacity, which has so far prevented a larger ​plunge in ⁢freight rates, he said.

“Whether that will continue, only time will ​tell,” he said. “We will need to adapt to the ‍new market situation over the next 18 months.”

The company said the number of containers it loaded onto ships between April and June fell by 6% from⁣ a year earlier, while average freight rates halved.

Maersk on Friday posted a slightly smaller ⁢than expected drop in second-quarter earnings and narrowed its profit forecast for the year.

Earnings before interest, tax, depreciation and⁣ amortisation (EBITDA) fell to ⁢$2.91 billion in the quarter​ from $10.3 billion a year earlier, beating ⁣analysts’ expectations of $2.41 billion in a Refinitiv poll. Revenues fell 40% to⁤ $13.0 billion.

It now expects underlying EBITDA of between $9.5 ​billion and $11 billion, against previous predictions ‌of between $8 billion and $11 billion.

(Reporting by Jacob Gronholt-Pedersen; editing by ‌Terje Solsvik, ‍Jacqueline Wong and Jan Harvey)

A.P. Moller-Maersk Warns‌ of Steeper ⁤Decline in Global Shipping Demand

Shipping ‌group A.P. Moller-Maersk has issued a warning about a significant drop in global demand for shipping containers by sea this year. The company ⁤attributes this decline to muted economic growth and customers reducing their inventories.​ Previously, Maersk had forecasted a decline of no more than 2.5%, but now expects container volumes to fall by as much as 4%.‍ As one of the world’s largest container shippers, with a market share of around 17%, ‌Maersk’s projections⁣ serve as a barometer for global economic and corporate health.

No Signs of Recovery

CEO Vincent Clerc expressed concern⁣ about the ongoing destocking that has hindered global trade activity, stating that there are no⁤ signs ⁣of it ending this ‍year. The company had anticipated customers to ⁤draw down inventories ​around the middle of the⁢ year, but that has⁣ not‌ materialized. Clerc believes it may happen at the ‌beginning of next year, resulting in the expected⁢ uptick in​ volumes not occurring‌ in the ⁣second half of ⁣this year. He also predicted ⁤that the drawdown of inventories would take ⁣longer in the U.S. compared to other regions.

Challenges in the‍ Industry

Maersk faced challenges this year as⁤ freight ⁢rates plummeted due ​to a global ⁢economic slowdown. Additionally, the industry has been grappling with the arrival of numerous new container vessels ordered during the pandemic. Most of ‌these orders are still ‍in the shipyard,‌ indicating a long‌ road ahead for the industry.⁤ However, the disciplined handling of the new capacity ‍has prevented a larger plunge in freight‌ rates so far. The company acknowledges the need to ​adapt to ⁤the new market situation over ‌the next 18 months.

Financial Impact

Maersk reported a smaller than expected drop in second-quarter earnings and revised its profit forecast for⁤ the​ year. Earnings before interest, tax, depreciation, and ⁤amortization (EBITDA) fell to $2.91 billion ⁤in the quarter, beating analysts’ expectations. Revenues ⁣also declined ​by 40% to $13.0 billion. The company now expects underlying ​EBITDA of between $9.5⁢ billion and $11 billion for the year.

(Reporting by Jacob Gronholt-Pedersen; editing by Terje Solsvik, Jacqueline Wong, and ‌Jan Harvey)

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