A.P. Moller-Maersk A/S, a bellwether for the world economy, lowered its estimate for global container trade, saying there are no substantial signs that volumes will recover this year.
Global container trade will probably contract as much as 4% this year, down from Maersk’s previous prediction of as much as 2.5%, the Copenhagen-based company said in a statement on Friday.
Maersk, along with the rest of the shipping industry, is facing an abrupt readjustment after generating record profits in 2021 and 2022 thanks to a spike in demand for consumer goods during the pandemic, coupled with limited vessel supply. Now, global economic growth is losing pace and companies are working through existing inventories instead of transporting new goods from Asia to Europe and the US.
“The inventory correction observed since the fourth quarter of 2022 appears to be prolonged and is now expected to last through year end,” Maersk said. “Overall, the environment for container trade and logistics services remains challenging. Currently there is no sign of a substantial rebound in volumes in the second half of the year.”
Still, the company reported second-quarter earnings that beat estimates and raised the lower end of its own 2023 profit forecast range, saying cost reductions softened the impact from the poor economic environment.
Earnings before interest, tax, depreciation and amortization fell to $2.91 billion in the second quarter. That compares with a median estimate of $2.29 billion in a survey of analysts. Maersk said said it now sees 2023 underlying Ebitda of $9.5 billion to $11 billion, up from an earlier projection of $8 billion to $11 billion.
“Our decisive actions on cost containment together with our contract portfolio cushioned some of the effects of this market normalization,” Chief Executive Officer Vincent Clerc said in the statement. “Cost focus will continue to play a central role in dealing with a subdued market outlook that we expect to continue until end year.”
Maersk, which transports about one-sixth of the world’s containers, said box volumes fell 6.1% in the quarter while freight rates declined 51% from the same period of 2022.
