Maersk Sees Rough Seas Ahead

Maersk Sees Rough Seas Ahead

almost 4 years ago2 mins

Maersk warned on Wednesday that sea freight might drop off by 25% this quarter, and investors had a few choice words for the world’s biggest shipping company 🚢

What does this mean?

The Danish firm – which handles a fifth of containers shipped globally – managed to post increased profit in the first quarter, but its shares still fell 6% as investors focused instead on its demoralizing forecast. With stores and factories across the world shuttered in the fight against COVID, there’s less need to transport, say, sneakers from Vietnamese production lines to US malls, or brake pads from German suppliers to UK assembly plants 👟 And as that demand disappears, Maersk is canceling voyages in an effort to bring down supply and prop up shipping rates. The company already shelved more than 90 trips in the first quarter – 3.5% of its total capacity – and it expects to cancel another 140 this quarter.

Source: Markets Insider
Source: Markets Insider

Why should I care?

Given that it’s on the front line of global commerce, bad news for Maersk is a bad sign for the economy – and vice versa 🌎 Its stock hit a 10-year low back in March, and the company sounded far from optimistic in Wednesday’s update, saying the future will be hard to predict if the global economy languishes near the bottom of a U-shaped economic recovery. That chimed with a warning from the Federal Reserve on Wednesday that the US government will probably have to take additional steps to support its own economy.

The outlook for shipping operators isn’t all bad: at least the economy is slowing faster than oil producers can turn off their taps, causing the cost of fuel to tumble 🛢 Cheaper fuel is even allowing some ships to take the long way around Africa – skipping the hefty fees for passing through the Suez Canal and saving up to $700,000 per vessel.

VLSFO shipping fuel prices
VLSFO shipping fuel prices
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