COPENHAGEN – A.P. Moller-Maersk, a bellwether for global trade, signalled weaker results for the rest of 2023 after reporting first-quarter operating profit which 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 Thursday. It expects global economic growth to remain “weak” at around 2 per cent this year.
There’s “still a lot of clouds that we need to handle”, chief executive Vincent Clerc said in an interview with Bloomberg.
As business activity slows, companies are seeking to reduce inventories at warehouses rather than moving new goods from Asia to Europe and the United States.
That’s a sharp turnaround from 2021 and 2022, when a spike in demand for consumer goods during the Covid-19 pandemic, coupled with supply-chain issues limiting vessel supply, led to record profits in the freight industry.
In the first quarter, Maersk reported a 56 per cent drop in earnings before interest, tax, depreciation and amortisation (Ebitda) to US$3.97 billion (S$5.2 billion). That compares with a median estimate of US$3.55 billion in a survey of analysts.
The shipping company said volumes declined 9.4 per cent in the quarter while freight rates fell 37 per cent from the same period in 2022.
Maersk repeated its forecast that the world’s container transport volumes may shrink as much as 2.5 per cent in 2023. It also stuck to its own full-year financial forecast of underlying Ebitda of US$8 billion to US$11 billion, which is roughly a quarter of the 2022 figure.
Mr Clerc warned that the shipping industry has to be disciplined on capacity 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 said. “There’s also some supply-side risks in the form of new ships coming into service in the second part of the year and in the next. This will create a new challenge for the industry.” BLOOMBERG
