As Cargo Volumes Slow, Maersk Invests in Flagship Shanghai Warehouse
Even as trade volumes on the core East-West lanes plummet, shipping giant Maersk is pursuing its business in China by investing $175 million in a smart logistics center in Lin-gang, Shanghai.
The Danish company, which is the world’s second largest container liner, said that it has secured approvals to build the first green and smart flagship logistics center within the Shanghai Free Trade Zone. When completed in the third quarter of 2024, the facility will achieve net-zero emissions, part of the company’s commitment to become carbon neutral by 2040 across its entire business.
The center is designed to provide integrated logistics, including international export consolidation, regional and global order fulfillment and distribution, cross border e-commerce, and other value-added services.
The center is designed with multistory warehousing storage totaling 150,000 square meters (37 acres). This will include four ramped, three-story conventional warehouses and one 80-foot-high warehouse with an automated storage and retrieval system.
“Shanghai plays a critical role for Maersk global network. With Lin-gang’s proximity to Yangshan port and its favorable free trade policies, our flagship logistics centre will provide agile and sustainable solutions, connecting and simplifying our customers’ supply chains,” said Caroline Wu, Managing Director of Maersk Greater China.
It will use advanced environmental-friendly materials in construction and be equipped with a rainwater management system and solar panels to optimize efficiency on water and energy consumption.
The multi-million-dollar investment comes even as the company is forecasting a more pessimistic outlook for global commercial shipping in 2023.
In its latest Asia Pacific market update, Maersk warned that falling trade growth, tighter monetary controls and weakening consumer demand point to a tougher start of the year for the container shipping sector. Cargo demand has been falling in recent months and will likely continue to be weak this year, thanks to high inventory and the threat of a looming recession.
Maersk's global container volumes fell by four percent during the third quarter of 2022 compared with a year earlier. The biggest drop was in intra-Europe volumes, which fell by 12.5 percent, followed by North American imports, which dropped by 9.3 percent. Oceania was one of the few bright spots with export volumes growing by 5.3 percent and imports rising by 4.9 percent during the period.
Meanwhile, the ocean freight industry has made few moves to rein in capacity voluntarily, leading to a race to the bottom for freight rates.
“A deep-seated instinct to protect volumes has kicked in, leaving carriers without control of the market,” said market research firm Drewry in a recent report. “While cargo demand has contracted at a faster pacer than many anticipated and some action has been taken to address overcapacity, it has been largely too little, too late."
There are some bright spots: port congestion in Europe and North America has been easing, and China has also lifted virtually all its COVID-19 restrictions after abandoning its "zero-COVID" policy, potentially boosting trade.
However, the lifting of China's COVID lockdowns could also have negative medium-term effects. China is experiencing a return of soaring positive cases, and the World Health Organization (WHO) believes that the official numbers underrepresent the true impact of the disease in terms of hospital admissions, ICU admissions and deaths.