Image source: Jason Blackeye - Unsplash
What's going on?
Maersk, the world’s second-biggest shipping company, warned on Wednesday that its profit’s poised to plunge this year.
What does this mean?
It looks like Maersk has found itself up a creek without a paddle. For two years, the industry could more or less name its price when it came to shipping fees, thanks to a flood of demand and simultaneous supply shortages. In fact, the rising tide was so strong that Maersk upped its profit forecasts twice last year, and with good reason: revenue rose a third in 2022, and operating profit jumped 57% to a record $31 billion. But now it seems shippers are about to encounter the icy waters of reality. With the global economic slowdown in full swing, their fees have slipped to pre-pandemic levels, and shipping demand’s set to sink like an anchor too. No wonder Maersk forecasts an operating profit of as little as $2 billion this year – a calamitous drop from 2022. That was well below analysts’ expectations, and investors staged a mutiny, throwing stock overboard and tanking shares.
Why should I care?
Zooming in: MSC’s at sea.
Maersk’s position as master of the seas was sunk by Mediterranean Shipping Company (MSC) last year, when the plucky firm overtook it as the world’s biggest container shipping company by volume. But while MSC bought more boats, Maersk focused on land-lubber logistics on terra firma instead. Now that the shipping industry’s slowing, Maersk could be glad it swapped some highways of the sea for real tarmac.
The bigger picture: Expect worse.
This shipping slowdown isn’t due to sail off into the sunset anytime soon: a forecast out earlier this month predicted that world trade will grow by a measly annual average of 2.3% through to 2031 – even more slowly than the global economy. That’s no wonder, with geopolitical tensions and war set to make some supply chains more regional – less efficient and more expensive, in other words.
Originally posted as part of the Finimize daily email.
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