Global trade is likely to slow this year as western economies tip into recession, according to the chief executive of the world’s second-largest container shipping group AP Møller-Maersk.
Søren Skou, head of the Danish group, told the Financial Times that after years of bumper profits, the bellwether of global trade is expecting earnings, demand and shipping freight rates to shrink because of falls in consumer confidence and consumption.
“We see a recession looming . . . On the one hand, we have never delivered such a great result financially, but every indicator we are looking at is flashing dark red. Clearly, we expect a slowdown, we expect lower earnings going forward,” Skou said.
Maersk reported its 16th consecutive quarter of year-on-year earnings growth in the third quarter on Wednesday, beating analysts’ forecasts with underlying operating profit up 60 per cent to $10.9bn. Skou said freight rates had started to normalise and that supply chain bottlenecks — caused by a surge in demand after the first wave of the pandemic — were easing. Shares in Maersk fell by 5 per cent on Wednesday morning as investors worried about the outlook. Maersk has ordered relatively few new ships during the boom times of the past two years but other lines have expanded their capacity far more, leading to concerns those vessels will arrive as the industry faces a slowdown.
Skou said 2023 would either present the “final proof” of his longstanding argument that the shipping industry had become more rational due to consolidation or would show it remained prone to poor decisions. Shipping companies, most of them privately owned unlike listed Maersk, have traditionally gone through big boom to bust cycles.
Skou said Maersk was prepared to idle ships in a slowdown. “We are ready for this,” he added. Maersk now expects global container demand — a proxy for trade growth as most cross-border freight is transported by sea — to contract by 2-4 per cent this year, against its previous estimate of growth of plus 1 per cent to minus 1 per cent.
The Danish group is better insulated if there is a slowdown in its shipping business from its logistics business, which now has annual revenues of about $17bn after a series of acquisitions. Skou said the business would be as big as its shipping business by the middle of the decade and that Maersk was looking for further acquisitions.
Maersk and other shipping groups making bumper profits are facing growing political pressure to pay more tax as they are currently taxed based on tonnage rather than earnings, leading to small bills at present. Skou said he hoped any tax changes would be done globally rather than nationally to ensure a “level-playing field” for all shipping companies.