NEW YORK (Agencies): A.P. Moller-Maersk A/S, the world’s leading shipping company, has reported a decline in its third-quarter profit and revenue. In response to the challenges posed by falling container rates and weakening demand in the global shipping industry, the company has taken a defensive stance by announcing the elimination of over 10,000 jobs.

These adverse conditions are expected to persist until at least 2026. Despite these difficulties, Maersk has maintained its full-year guidance at the lower end of its previous projections. Vincent Clerc, the Chief Executive Officer of Maersk, expressed his concerns about the future, stating, “If you look at the order book and what is expected in the coming years, it appears that we are entering a period of subdued and pressured business environment for the next two to three years.” Maersk, which commands a significant 17% share of the global container trade, has been reducing its workforce since January, with plans to have fewer than 100,000 employees by the end of the year, resulting in a cost savings of $600 million. Approximately 6,500 positions have already been cut. Maersk serves as a crucial indicator of the state of global trade, and it is clear that container lines are experiencing a decline in earnings after the record profits achieved during the surge in demand for consumer goods in 2021-22, driven by the COVID-19 pandemic. Global shipping rates on major routes, as indicated by the World Container Index and the Baltic Dry Index, have already plummeted by 75% to 85% from their peaks in 2021.

Vincent Clerc acknowledged these challenges in a company press release, stating, “Our industry is adjusting to a new normal with subdued demand, prices returning to historical levels, and rising costs due to inflationary pressures. Since the summer, we have observed excess capacity across most regions, leading to price declines, with no significant increase in ship recycling or idling.” In response to this news, Maersk’s shares fell by as much as 14% to 10,485 kroner, marking a three-year low in Copenhagen.

Other shipping companies, such as Hapag-Lloyd (-6%), DSV (-2.4%), and Kuehne + Nagel (-1.8%), also saw declines in their share prices. Goldman Sachs analysts have issued a cautionary note to clients, suggesting that the global shipping industry may be entering a more prolonged downturn and recommending the sale of Maersk shares.

Bloomberg Intelligence has warned that Maersk may not experience an improvement in earnings until 2025. Morgan Stanley has also expressed a disappointing outlook. Meanwhile, the JPM Global PMI Manufacturing Index has remained below 50 (indicating contraction) for the entire year, reflecting the challenging conditions in the manufacturing sector.

By Media

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