Maersk, the Danish shipping giant, has predicted a further decline in global demand for shipping containers by sea this year, prompted by stunted economic growth and a reduction in inventories by customers.
The company also reported a sharp fall in second-quarter earnings on the back of plunging container rates but still managed to beat market expectations and upgrade its full-year guidance.
It, however, said volume is expected to fall by as much as 4 percent against a previous worst-case scenario of 2.5 percent as companies cut their inventories amid recession risks in major markets in Europe and the United States.
Maersk also posted a second-quarter profit before interest, tax, depreciation, and amortisation (EBITDA) of $2.91 billion, well below the $10.3 billion recorded in the same quarter in 2022.
The company has long warned of an abrupt decline in earnings after an exceptional 2022 caused by high ocean freight rates that powered shipping firms to record-breaking profits, begins to normalise rapidly.
“Maersk revenue dropped by 40 percent year-on-year, from $21.65 billion in the second quarter of last year to $12.99 billion, as container rates continued to fall and volumes remained weak due to continued destocking particularly in North America and Europe,” the company said in its quarterly report.
Commenting on the report, Vincent Clerc, CEO of Maersk said: “The second quarter result contributed to a strong first half of the year, where we responded to sharp changes in market conditions prompted by destocking and subdued growth environment following the pandemic-fueled years.”
According to him, “Our decisive actions on cost containment together with our contract portfolio cushioned some of the effects of this market normalisation. Cost focus will continue to play a central role in dealing with a subdued market outlook that we expect to continue until the end year.”
Maersk also narrowed its profit forecast for the full year and now expects underlying EBITDA to come in between $9.5 billion and $11 billion, having previously estimated a range of between $8 billion and $11 billion.
Also, Maersk shares dropped 5 percent by mid-afternoon in Europe.
Analysts however believed that the container shipping market is beginning to normalise after the first quarter of 2023 saw a significant drop in profitability for most shipping lines, representing the third quarterly downturn after seven straight quarters of record income for shipping giants during the Covid-19 pandemic.