Economic Insider

A Difficult Time for Containers Shipment as Maersk Reports Loss in Revenue

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Photo Credit: Chris Ratcliffe/Bloomberg

The demand for shipping containers has also been adversely impacted by the global economic slump, according to AP Moller-Maersk, which disclosed this on Wednesday after reporting a substantial loss in demand. In addition, the deterioration of customer confidence and the disruption of the supply chain make this worse.

The Danish shipping and logistics business, which is regarded as a barometer for world trade, compared its second quarter statistics from last year and discovered a 7.4% decrease in loaded container ships this year. The finding forced Maersk management to alter its predictions for this year’s performance in the container business area.

Maersk said, “Geopolitical uncertainty and higher inflation via higher energy prices continued to weigh on consumer sentiment and growth expectations.”

“Given this background, in 2022, global container demand is now expected to be at the lower end of the -1% to +1% forecasted range,” the company added.

The worsening inflation and disruptions in the energy supply bring about the range that Maersk is anticipating.

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CEO Soren Skou released a statement that said:

“The result was driven by strong contract rates in Ocean, rapid, profitable growth in Logistics and continued solid performance in Terminals. Volumes in Ocean were softer as congestion continued, and the war in Ukraine weighed on consumer confidence, particularly in Europe. However, in Logistics, we grew volumes above the market as our Ocean customers continued to buy into our value proposition, resulting in organic revenue growth of 36pct., notching up the 6th quarter in a row of more than 30pct. organic growth.”

Shipment congestion is the main catalyst of the decline

The sector is starting to feel the effects of the Covid-19 lockout and the conflict between Russia and Ukraine. Maersk claims that the decline in container shipments was particularly noticeable in Europe, where port inventories had grown primarily as a result of blockades and shipping restrictions.

“In Europe, supply chain congestion remained as retailers. Manufacturers kept containers in ports and warehouses due to weak final demand. In addition, port lockdowns in China due to the Covid-19 zero-tolerance policy. Consequences from the war in Ukraine also caused strains in key areas of the logistics network, added Maersk in its statement.

Maersk reported that they exceeded their freight department’s expectations during the second quarter. Due to reduced worldwide freight prices brought on by trade congestion, the freight industry is doing well. According to Maersk, “exceptional market conditions” have led to an increase in earnings for the logistics industry.

“Continued congestion and dislocation of supply. Demand fundamentals in the logistics industry increases the uncertainty surrounding the outlook for freight rates,” Maersk said.

During the second quarter

According to current figures, Maersk’s earnings rose by 52 percent year over year to $21.7 billion. While operational profits doubled to $8.9 billion.

Higher freight rates translate into significant financial gains for the container shipping sector. To compensate for market interruptions. Transport their goods to their intended locations in the current environment, businesses must now use shipping services.

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In the first half of the year, the average freight prices are expected to increase by 80%. According to Hapag-Lloyd AG, a shipping company.

Maersk claims that although freight prices have lately decreased, they are still above normal and are certain to break records. As new elements emerge, prices will inevitably change, according to the company.

“We delivered an exceptionally strong result for the second quarter. Consequently recorded the 15th quarter in a row with year-on-year earnings improvements. We are pleased with our performance across the business in the first half of 2022. Which clearly demonstrates the progress and great work by the entire Maersk team. Transforming the company towards becoming a global, integrated logistics company,” concluded Soren Skou, the CEO of AP Moller Maersk.

Source: CNBC

Opinions expressed by Economic Insider contributors are their own.

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