The shipping of containers is blocked in a significant blockage as demand increases

Maersk containers aboard the container ship Hammonia Husum as it leaves Portsmouth Harbor. (Photo by Andrew Matthews / PA Images via Getty Images)

Andrew Matthews | Images PA | Getty Images

Container shipping companies are stuck in a “significant deadlock” as invigorated global demand expands capacity and increases freight rates, Maersk CEO Soren Skou told CNBC on Wednesday.

Maersk, the world’s largest container shipping company, on Wednesday outperformed fourth-quarter profit expectations on Wednesday and posted an optimistic outlook for 2021 after an “exceptional quarter while difficult”.

Skou explained that after a 15% drop in Maersk volumes in the second quarter of 2020, the sharp return towards the end of the year, especially in the US and Europe, saw global trade return to a 5% year-on-year increase. year.

“This caused a significant blockage in terms of lack of capacity and lack of containers, which led to increased transport tariffs,” Skou said.

Maersk shares fell by more than 8% in early transactions.

“Completely unprecedented”

After removing capacity in declining demand in the second quarter, Skou told CNBC that Maersk and other carriers now have full container capacity deployed again.

“So we are trying to cope with an increase in demand that is completely unprecedented, both an increase in demand as consumers spend, but also an increase in demand because a large repopulation has begun, because large retailers have stopped buying. things in Asia the second quarter of 2020 and until the summer, “he said.

The Danish company, seen as a bell for global trade, posted quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 2.71 billion, fractionally over $ 2.68 billion forecast by analysts, according to a Refinitive survey.

It was up 85% from the same period last year, while revenue rose 16% from a year earlier to $ 11.3 billion as demand for goods began in the previous quarter. he accelerated.

The company now expects EBITDA of between $ 8.5 billion and $ 10.5 billion in 2021, compared to $ 8.3 billion last year, noting that the outlook continues to be affected by the Covid-19 pandemic and its impact on demand models.

In the earnings report, Skou said Maersk is confident that earnings will continue to grow as “the economic situation normalizes in 2021 and beyond.”

“Given the current exceptional situation where increased demand has led to bottlenecks in supply chains and a lack of equipment, the first quarter of 2021 is expected to be stronger than the fourth quarter of 2020,” the company explained in the report.

Empty containers

In January, reports surfaced that shipping companies were rejecting tons of US agricultural exports worth hundreds of millions of dollars in the last quarter of 2020, instead opting to send empty containers back to China to be filled with more profitable goods. .

Meanwhile, a shortage of containers during the resurgence of global demand reduced shipping costs by 300% and led to delays for goods shipped from China.

“For carriers, it’s obviously more attractive to have revenue, if you want, in the container in both directions, but clearly I’ve also heard stories of carriers deciding to return empty containers and send them back to Asia rather than you expect. a week or two more to fill it with US exports, “Skou told CNBC’s Squawk Box Europe on Wednesday.

He added that Maersk “worked hard” to deliver on promises made to US exporting customers.

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