Global giant of container shipping, Maersk, announced record profits on Wednesday as it released its Q3 results. The Danish firm’s maritime operations carried the strong performance as freight rates exploded, but it also noted a slow down in demand in the near future.
CEO Soren Skou described the firm’s “exceptional results” for 2022 so far by the ongoing increase in ocean freight rates, adding that such rates have clearly peaked and will begin to normalise in the fourth quarter off the back of lower consumer demand and an easing of supply chain congestion.
Indeed, he flagged that earnings would come down in the maritime operations of the company over the next months, but would pursue growth opportunities in its logistics division.
“With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon,” Mr Skou said in a statement Wednesday.
“This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand. While we expect a slow-down of the global economy to lead to a softer market in Ocean, we will continue to pursue the growth opportunities within our Logistics business.”
Maersk, widely perceived as a barometer for global trade due to the sheer size of its operations, posted earnings before interest, taxes, depreciation and amoritisation (EBITDA) of $10.9 billion (€11 billion), registering a 60 per cent year-on-year increase and surpassing analyst expectations.
The company reported that it expected global container demand to contract between two per cent and four per cent in 2022, down from the previous projections of +/- one per cent, observing that freight and charter rates actually declined in the third quarter due to demand normalising and China loosening COVID restrictions.
As inflation continues to seriously impact the purchasing power of consumers around the world, people become more cautious about their spending.
What does a slowdown of container demand mean for the world economy?
When global freight rates come down, this typically signals a slowdown of economic activity across the globe. Central Banks around the world have been attempting to strategically slow down economic activity by raising interest rates in an effort to combat inflation for some months now.
Policy makers must be careful, however, as slowing the economy too much can herald in a recession, which is what commentators believe is already happening in much of the west.
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