World’s Largest Container Operator Writes Global Trade Obituary

Way back in February, then-CEO of Maersk Group Nils Andersen described business conditions as “worse than 2008.” Maersk Line – the largest container operator in the world – had just reported $182 million in red ink for the quarter and Andersen glumly forecast demand for seaborne container transportation rising just 1-3% for the year.

On Wednesday, we got the latest batch of results from Maersk and it was anything but pretty. Here’s WSJ with the rundown:

Shares in A.P. Moeller-Maersk A/S fell as much as 9% on Wednesday after the Danish shipping-and-oil giant reported a 43% drop in third-quarter net profit amid sustained weak freight rates and persistently low oil prices.

Net profit dropped to $429 million from $755 million a year earlier, missing analysts’ forecast of $496 million. Revenue declined 9% to $9.18 billion, compared with expectations of $9.39 billion, according to FactSet estimates.

Group underlying profit, which strips out one-off items, dropped to $426 million from $662 million a year earlier, and would have been worst had it not been for a strong performance from its drilling operations. Maersk Line, the world’s biggest container operator in terms of capacity, swung to an underlying loss of $122 million, from an underlying profit of $243 million a year ago. Maersk Oil contributed an underlying profit of $146 million, up from $32 million a year earlier.

For the full year, Maersk is forecasting an underlying profit below $1 billion, compared with $3.1 billion last year…

Yuck. Here’s a look at how the shares are trading:

maersk

Bear in mind, this comes at a time when global trade growth is trailing the pace of global economic growth – something which, until the last three years, hadn’t happened since 1985. Here are a couple of bullets from the WTO which should give you a good idea of where trade is headed:

  • World merchandise trade volume is expected to grow 1.7% in 2016, accompanied by real GDP growth of 2.2% at market exchange rates. This would be the slowest pace of trade and output growth since the financial crisis.
  • Trade growth was weaker than expected in the first half of 2016 due to falling import demand and slowing GDP growth in several major developing economies as well as in North America.

Now clearly, this is not an environment well suited to protectionism and other isolationist policies. Here’s  WTO Director-General Roberto Azevêdo:

The dramatic slowing of trade growth is serious and should serve as a wake-up call. It is particularly concerning in the context of growing anti-globalization sentiment.  We need to make sure that this does not translate into misguided policies that could make the situation much worse, not only from the perspective of trade but also for job creation and economic growth and development which are so closely linked to an open trading system.

Right. And that’s a point we’ve been pounding the table on for quite some time. This is not the time to try and de-globalize the world. And yet that’s the direction we seem to be headed.

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4 thoughts on “World’s Largest Container Operator Writes Global Trade Obituary

  1. It used to amaze me to see coal barges pass each other in opposite directions on the Ohio River, good for business but inefficient. Global trade is much the same, in addition to being wasteful domestic jobs are killed in the name of making cheap products by low cost labor in a foreign country.

  2. It is not a simple-minded either/or question of globalization or de-globalization, it is a question of what pace globalization and for whose benefit.

    A palpable pause in the pace of globalization of two, five, ten, twenty, thirty years could quite well be beneficial to more people than it would be beneficial to a few people which is what we have experienced, for many badly, over the past twenty-five years or so.

  3. greed,Greed, GREED. Margins, yield,greed, keep the game going until there are what? No more fish predicted by 2050. Another BILLON people to fight over a shrinking amount of resources. All because a few want more WHAT? $$$$$$$$$$$$$$$.

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