Maersk warns of slowing container demand ahead of global recession

Oslo  — Danish shipping giant APMoller-Maersk cut its forecast on Wednesday and warned of slowing demand for transport and logistics ahead of a likely recession this year, even as it beat third-quarter earnings expectations.

“It is clear that freight rates have peaked and started to normalise during the quarter, driven by both decreasing demand and easing of supply chain congestion,” CEO Søren Skou said in a statement.

The company’s shares were down 4.4% on Wednesday, and have now fallen 38% since hitting a record high of 24,920 Danish kroner on January 13.

The Copenhagen-based company, one of the world’s biggest container shippers with a market share of about 17%, is often seen as a barometer of global trade.

“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon,” Skou said.

Maersk now sees global container demand falling by 2% to 4% this year, citing an unfolding economic slowdown expected to continue into 2023. Its previous guidance was for an outcome towards the lower end of a range of minus 1% to plus 1%.

Freight rates surged in step with higher consumer demand during the pandemic, resulting in congested ports and delays, and while those rates have since come down, containers still cost more to ship than before the pandemic.

While spot rates are down, Maersk’s average contract rate is still expected to be higher this year compared to 2021, though $200 lower per container than it believed in August, it said in presentation material.

The guidance implies core earnings dropping about 40% in the fourth quarter compared to the third, analysts at JPMorgan said in a note to clients.

“The high level of uncertainty on midterm profitability (remains) the primary question,” they said.

Maersk’s earnings before interest, taxation, depreciation and amortisation (ebitda) rose to $10.86bn in the June-September period from $6.94bn a year ago, above the $9.78bn forecast by analysts in a poll gathered by the company.

Revenues climbed 37% to $22.77bn, though the number of containers it loaded on to ships fell by 7.6% compared with a year earlier.

The company repeated it expects underlying ebitda of about $37bn this year.

Reuters