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“Mumbai Mærsk” in the North Sea: Too many ships in a weak economy

Photo: Sina Schuldt/dpa

At least financially, the detour around the Cape of Good Hope can be worthwhile for shipping companies, because customers have to pay more for the longer route. But the recent increase in freight prices due to the Houthi attacks in the Red Sea will not last, according to the Danish shipping company Møller-Mærsk.

The overcapacity of ships will cause prices to fall again in the future, said company boss Vincent Clerc when presenting the annual balance sheet in Copenhagen. In the fourth quarter, operating profit (Ebitda) also fell to $839 million, as the world's second largest container shipping company announced. A year earlier, when the industry was still benefiting from the Corona boom, it was $6.54 billion. Sales for 2023 were $51.1 billion.

The Mærsk share price fell by more than 13 percent after the results and outlook were published. The shares of German competitor Hapag-Lloyd fell by almost eleven percent. For 2024, Maersk expects profits to continue to be significantly lower due to excess capacity on container freighters.

Maersk handles around a sixth of global container traffic at sea. The company had already warned in November that demand would remain weak until 2026. That's why management wants to cut 10,000 jobs. AP Møller-Mærsk operates in 130 countries and employs more than 100,000 people worldwide.

Slight growth expected in 2024

The shipping company made record profits in 2021 and 2022 when high demand for consumer goods met globally faltering supply chains during the corona crisis. Freight rates have recently returned to normal and the weak economy is putting a strain on world trade.

“After the extraordinary boom caused by the pandemic, 2023 was a year of transition,” said company boss Clerc. »We achieved solid financial results despite significantly changed circumstances and are well positioned to overcome the expected headwinds in 2024.«

The shipping company expects that global container trade will increase by 2.5 to 4.5 percent this year and that it itself will grow equally. But if transport prices fall again, this will also weigh on Mærsk's results, management estimates.

Clerc said they had adapted to the new reality with strict cost management. »The ongoing disruptions and market volatility underscore the need for resilient supply chains.«

Because of the strained supply chains during the corona pandemic, shipping companies had significantly increased their shipping capacities - and the freight rates for transporting goods had skyrocketed. However, demand subsequently collapsed as many companies reduced their inventories and increased inflation dampened consumer sentiment. In recent months, shipping companies have allowed ships to sail slowly or even empty in order to artificially reduce freight capacity.

In recent weeks, the conflicts in the Red Sea have caused transport prices to rise slightly again. The Houthi militants had fired rockets at ships. That's why the freighters are currently heading south around Africa instead of taking the short route through the Suez Canal. Typically, almost ten percent of all German imports and exports are transported through the canal; the shipping route was once one of the busiest in the world.

apr/dpa/Reuters