Maersk Expects Significantly Lower Container Demand due to Pandemic
Shipping giant A.P. Moller – Maersk cautioned that it expects that the global market growth in demand for containers to contract in 2020 due to COVID-19. They said that there was no doubt that the lockdowns in most of the world has already led and will continue to lead to significantly lower demand.
Speaking to investors, the shipping company said that it expects to see a significant decline in volumes during the second quarter of 2020 as a result of the coronavirus and its impact on global business. Maersk forecast that as many as 140 sailings might be canceled during the current three month period.
“Looking into Q2 2020, visibility remains low as a result of the COVID-19 pandemic,” said Soren Skou CEO of A.P. Moller – Maersk. “We expect volumes in Q2 to decrease across all businesses, possibly by as much as 20-25 percent.”
This will be a continuation of the trends the company experienced during the first quarter of 2020. Maersk said that it had made adjustments in its capacity canceling more than 90 sailings during the first quarter leading to a 3.5 percent decline in average deployed capacity. At the end of the first quarter, the line said that its idle fleet made up 9.4 percent of its total capacity. That is the firm’s highest level of idled fleet capacity in more than 10 years.
Despite the COVID-19 pandemic’s profound impact on global trade, the company, however, reported that it had been able to keep momentum in its strategic transformation and demonstrated robustness to weather the crisis. For the first quarter, the company reported a 23 percent improvement in earnings driven mostly by its ocean business as well as a small increase in revenues despite lower volumes during the quarter.
“The strong results were made during a quarter with sharp fuel cost increases derived from the industry’s switch to low-sulphur fuel and on the backdrop of a contraction in global trade due to lockdowns in most regions,” said CEO Skou. “The transformation of A.P. Moller - Maersk from a diversified conglomerate to becoming a focused, integrated and digitised global logistics company continues to be validated also in this quarter.”
He highlighted that through strategic actions the company has transformed from a conglomerate focusing its operations in global container logistics. They recently completed acquisitions including a US-based warehouse and distribution company, and a cold store construction in St. Petersburg, Russia.
Addressing the current high level of uncertainty towards the demand, the freight rates, and the oil price, Maersk said that it would continue to match capacity to demand to ensure that it keeps costs low while also supporting customers' global supply chains.