Maersk Line Expects Trade Rebound in 2021 -- Update
19 November 2020 - 7:20AM
Dow Jones News
By Costas Paris and Dominic Chopping
Danish shipping and logistics giant A.P. Moeller-Maersk A/S
expects that the global container market could expand by up to 5%
in 2021 in a rebound from the pandemic-driven hit to trade in the
first half of this year.
The parent of Maersk Line, the world's largest container line by
capacity, said Wednesday that trade volumes are growing again this
fall as retailers and manufacturers restock depleted inventories
and consumers who were hunkered down in the early months of the
coronavirus pandemic resume spending.
"Right now we see volumes slightly above the same period from
last year after falling off a cliff in the second quarter," said
Maersk Chief Executive Søren Skou. "A lot of the money that had
previously gone into holiday travel and restaurant visits has gone
to goods like flat screens and home improvement."
Improving trade demand, along with stronger pricing and lower
costs, helped push Maersk to a $927 million profit in the third
quarter, an 83% improvement over the $506 million earnings in the
same quarter a year ago.
The report marked the latest in a string of strong earnings
reports from shipping lines that idled ships and canceled hundreds
of sailings in the spring and then reaped higher rates as economies
around the world unwound lockdowns aimed at stemming the spread of
Covid-19.
"An unexpected recovery in demand after the second-quarter
slowdown brought back all available tonnage and significantly
higher prices in the short-term freight market," said Mr. Skou.
Maersk's third-quarter revenue fell 1.4% to $9.92 billion, above
the company's own guidance of $9.9 billion, and shipping volumes
fell 3.6% from a year ago.
This was more than offset by lower costs from reduced sailings,
lower fuel costs and higher freight rates.
Average freight rates at Maersk were 4.4% higher than a year
ago. Industrywide rates for spot-market sailings have surged 170%
since January to $3,887 per box for trans-Pacific trade and are up
by a third to $1,500 for business from Asia to Europe, according to
the Shanghai Containerized Freight Index.
Maersk late Tuesday upgraded full-year guidance for the second
time in a month. It said it now expects full-year earnings before
interest, tax, depreciation and amortization of $8 billion to $8.5
billion, compared with $7.5 billion to $8 billion previously.
Container operators withdrew as much as 20% of their capacity in
the second quarter but container imports are flowing back into
Western markets, with U.S. retailers now in a race to restock
before the holiday season.
French carrier CMA CGM SA and Germany's Hapag-Lloyd AG have also
said they have seen surging demand for Asian imports from U.S.
retailers such as Amazon.com Inc. and Walmart Inc. The peak season
for shipping typically runs from August to early October, but this
year, operators say it started in July and is still going.
"The tailwinds from rates and volumes are accelerating into the
fourth quarter," Mr. Skou said. "We now expect to deliver a fourth
quarter that is stronger than the third. This is unusual and not
our normal seasonality, and it has enabled us to upgrade our
expectations for the full year."
Mr. Skou said he expects the broader container market to shrink
up to 5% this year and return to pre-pandemic levels next year.
Analysts warn the market will still be subject to wide swings,
based on the response to efforts to fight the coronavirus.
"If the coming vaccines work and the virus is eradicated, people
will again start spending for travel and going out, which means
volumes will drop because the inventory will overshoot," said Lars
Jensen, chief executive of Copenhagen-based SeaIntelligence
Consulting.
Write to Costas Paris at costas.paris@wsj.com and Dominic
Chopping at dominic.chopping@wsj.com
(END) Dow Jones Newswires
November 18, 2020 15:05 ET (20:05 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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