Shipping giant Maersk reported first quarter results that show shipping volumes and costs are beginning to drop back to pre-COVID levels.
Maersk’s results are seen as a bellwether for both the global economy and the shipping industry in general, and show that the pandemic inspired madness is starting to slow, although the company warns of a “radically changed business environment.”
The shipping company’s ocean earnings were down by 65 per cent, to A$3.43 billion, with revenues for the three months of A$8.5 billion. Maersk notes this is “in line with expectations.”
The first quarter saw an overall decrease of 9.4 percent in loaded volumes in ocean freight, compared to Q1 2022, which has served to ease port congestion.
Ocean freight rates have decreased by 37 percent compared to Q1 2022, and by 26 percent compared to Q4 2022.
“We delivered a solid financial performance in a challenging market with lower demand caused by a continued destocking,” said Vincent Clerc, who took over as CEO of Maersk at the start of the year.
“Visibility remains low for the remainder of the year and moving through this market normalisation, we remain focused on proactively managing costs.”
Clerc said improved demand is expected in the second half of 2023, although at continued lower freight rates, signalling a stabilising of the costing that blew out during the pandemic.
Clerc told the Wall Street Journal he hasn’t yet seen a strong sign that the markets are normalising, with trade volumes still contracting.
“As we adjust to a radically changed business environment, we continue to support our customers in addressing their supply chain challenges,” Clerc told the Wall Street Journal.
“We are pleased to note that customers continue to value the integrated logistics solutions and close partnership we provide.”
Clerc also expected when container demand picks up, which is expected in the second half of the year, it will be because the industry as a whole is responding better to the ebbs and flows.
“The stabilisation of rates you saw in the first quarter could not have been possible if it was only Maersk behaving in a rational way,” he explained.
“We have seen more rational behaviour. We definitely see better conduct. If you look at the downcycles in connection with the financial crisis in 2008-09 and the one in 2015-16, the market adjusted all the way down and had to rebound to find a balance.
“In this case, the market went down and then found a balance without having to go all the way down and hit the bottom.”
