Ocean shipping giant AP Moller-Maersk reported first-quarter profits of $2.3 billion, two-thirds less than the same quarter in 2022. Revenue fell by 25 percent to $14.2 billion.
Shipping volumes dropped 9.4 percent and the company cut its rates 37 percent to compete.
Although demand for shipping is likely to improve in the second half of this year, earnings will remain weak and this year’s first quarter is likely to be the strongest financially, CEO Vincent Clerc warned in a Financial Times interview.
The shipping industry is about to take delivery of fleets of new ships that companies ordered during the post-COVID boom when supply chains were snarled.
Those ships will be delivered now through 2024.
Freight “volumes are coming back, but it’s not like the macroeconomic backdrop points to a lot of growth to take care of this” flood of new vessels, Clerc said.
Thanks to the COVID War and surging demand afterward, the shipping industry made more money from 2020 through 2022 than it had in the preceding six decades, the FT said.
Now shippers are renegotiating their long-term contracts to reflect today’s lower freight rates, which are as little as a tenth what they were at the peak in 2022.
During the first week of March this year, sailing a loaded container from China to Los Angeles cost $1,238. A year earlier, the price was $15,600, according to the Freightos Baltic Index.
To cut costs, Maersk has docked some ships and has cut sailing speeds to save on fuel.
TREND FORECAST: As goes shipping, so goes the economy. This is a clear signal of the global economic slowdown. Therefore, the higher interest rates in the U.S. and EU rise, the deeper their economies will fall and the fewer products consumers will buy.
TRENDPOST: Maersk is using a portion of its windfall profits to expand its land-based logistics business to offer customers a “one-stop shop” for moving goods around the world, as we reported in “Maersk Building End-to-End Logistics Service” (12 Oct 2021).