Shipping Rates are Sky High, click the link to see what multi billion dollar Maersk boss has to say . . .
The boss of AP Moller-Maersk, the world's largest container shipping line, has defended the industry against complaints from exporters and regulators over disruption to supply chains and sky-high rates.
Soren Skou, chief executive of Maersk, told the Financial Times that the pandemic had led to “an extraordinary situation”, with demand plummeting at the start of 2020 and then an unexpectedly strong recovery at the end of the year as consumers ordered online in their droves and retailers were forced to replenish stock. US regulators have been among the most vocal in their criticism, launching an investigation of the industry, while exporters have complained to the EU about brutal and unexpected rises in freight rates and contracts being unilaterally broken. “When rates spike, it attracts attention from regulatory authorities. And it has done that here. As an industry, we have been investigated by everybody over the last five years — the [US] DoJ, the EU, China, Russia. There’s no evidence of any wrongdoing, or anything that shouldn’t be going on,” Skou said. In the last two months of 2020, freight rates between China and Europe quadrupled, causing shortages of a wide range of goods. Container shipping groups suffered heavy losses during the 2008-09 financial crisis and responded by consolidating, including by forming three alliances that encompass all the biggest companies. But that has led to complaints from some exporters about the power these alliances exert.
Skou stressed that the steep rises in freight rates were due to the recovery in demand that had surprised many in the industry, and said the situation should improve in 2021. “It’s an extraordinary situation where you have a massive drop in demand and then at the end of the year all that demand comes back. The ships don’t become larger because the demand increases,” he said.
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His comments came as Maersk reported an almost doubling in its fourth-quarter profits and forecast that this year would be even better. But shares fell 8 per cent on Wednesday, as investors worried that rates have peaked and will normalise after a record first quarter for the group. Maersk’s earnings before interest, tax, depreciation and amortisation increased 85 per cent to $2.7bn in the fourth quarter compared with a year earlier. Revenues increased 16 per cent to $11.3bn. The group said it expected underlying ebitda this year to be $8.5bn to $10.5bn, above the $8.3bn recorded in 2020, and that the first quarter of 2021 would be stronger than the previous three months. Skou said the “very strong” performance of container shipping at the end of 2020 was “a little bit of a sideshow”. He highlighted instead that Maersk had managed four consecutive quarters of earnings growth despite the pandemic, leaving it with “plenty of firepower” for acquisitions. It is aiming to expand its land-based logistics business to offer customers a start to finish service for their goods. Skou said the pandemic made it hard to give guidance but noted that the first quarter was forecast to be stronger than the “record” fourth quarter.
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