World’s Biggest Container Shipper Warns of 25% Slump in Volumes

(Bloomberg) -- The world’s largest container line is bracing for an historic slump in demand after emergency lockdowns across the globe left international trade in tatters.

A.P. Moller-Maersk A/S, which controls about one-fifth of the global fleet used to transport goods by sea, says the fallout from Covid-19 will drive volumes down by as much as 25% this quarter.

The bleak signal from Maersk follows a warning from the World Trade Organization last month that the pandemic could result in the worst collapse in international trade flows since World War II.

Copenhagen-based Maersk said the coronavirus pandemic has already “had a significant impact on the activity level.” The company now sees the global container market contracting this year, compared with a previous forecast for growth of somewhere between 1% and 3%.

Shares in Maersk fell as much as 6.2% in the Danish capital. Its market value has dropped more than 30% this year, to about $18.5 billion.

Nearly all regions will suffer double-digit declines in trade volumes in 2020, according to the WTO. Exports from North America and Asia will be hit hardest, it said in April. The global container industry has had to idle about 13% of its fleet worldwide, according to data compiled by Alphaliner.

Chief Executive Soren Skou lashed out at what he characterized as an unfair advantage he said some Asian competitors have been given thanks to access to state aid. Skou called the situation “totally unacceptable” and urged the European Union to “do something about” it.

Maersk estimates that global container trade fell 4.7% in the first quarter, with Covid-19 hitting both the supply chain and demand.

“Covid-19 and the subsequent country lockdowns have led to a severe downturn in production and demand in most parts of the world,” Maersk said. “While some countries are slowly beginning to open up, others are still only in the early stages.”

In an interview with Bloomberg Television, Skou said he’s still expecting “some sort of U-shaped recovery.”

“Right now, we believe we are at the bottom and we will probably be here for a while,” he said. “But in the third quarter, the fourth quarter, we should start to see some recovery.”

Though the global outlook is grim, Maersk managed to deliver growth in its operating profit. After earlier reporting preliminary Ebitda of $1.4 billion, Maersk delivered $1.52 billion by that measure, according to Wednesday’s report.

“It’s not unrealistic that they might at least get somewhere near” the $5.5 billion Ebitda outlook that was announced before 2020 guidance was suspended, said Per Hansen, an investment economist at Nordnet. Still, the second quarter “will be weighed down by high waves and huge uncertainty.”

Maersk’s revenue increased slightly to $9.57 billion, which was better than the $9.36 billion estimated by analysts.

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