The chief executive of shipping giant Maersk, seen as a barometer of global trade, said on Wednesday that the company saw no signs of a U.S. economic recession as demand for cargo remained strong.
“Realistically, all of the concerns about a recession that we’ve seen in the (container) market over the past few years remain intact,” Vincent Clerc told CNBC’s “Squawk Box Europe” on Wednesday. Surprisingly resilient.
Clair said U.S. inventories – goods stored before delivery or processing – are “higher than at the beginning of the year, but not at levels that are worrisome or appear to indicate an imminent significant economic slowdown.” There is some unpredictability in the quantities.
“We’ve also looked at purchase orders from many retailers and consumer brands that need to be imported into the U.S. to meet demand for the next month, and they still appear to be quite strong… at least according to our data and indicators. ” This seems to indicate that people still have a certain degree of confidence that the current level of consumption in the United States will continue. “
A series of weaker-than-expected employment data divided economists and market participants last week, with fears of a recession in the United States, the world’s largest economy, suddenly escalating.
According to the latest data released by the U.S. Census Bureau, U.S. retail trade inventories (a measure of unnecessary increases) increased by 5.33% year-on-year in May to $793.86 billion.
A report released on Wednesday by leasing platform Container xChange said indicators show inventories are higher than demand, meaning the coming months will be less of a “boom period” for container traders, logistics markets and retailers hoarding inventory. Prosperity”.
Maersk’s Clerk said the company has been surprised by the recovery in container throughput over the past few years and said it expects this to continue in the coming quarters – with no signs that the global economy is heading for a recession.
He went on to say that Chinese exports have been a strong engine for container traffic as the global share of containers originating from or destined for China increases.
The Danish company’s outlook for 2022 was decidedly more pessimistic, warning that inflation, the threat of a global recession, the European energy crisis and the war in Ukraine would weigh on demand.
The combination of these factors will lead to lower freight rates in 2023, leading to a sharp decline in Maersk’s profits.
That trend has been partially reversed this year as geopolitical tensions intensified in the Red Sea, causing shipping lines to reroute trade around Africa’s southern coast, lengthening sailing times and draining capacity from the global system.
Red Sea will lead to further inflation
Clare told CNBC on Wednesday that he expects the Red Sea diversion to continue at least until the end of the year.
“Of course, that requires more capacity and more ships to move global trade around the world, which creates some shortages in the second and third quarters that we’re dealing with right now,” he said.
“That means, in the short term, the costs are higher, so we have to incur huge costs, whether it’s needing more ships or needing more containers to do the job we expect.”
He continued that if this situation persists, Maersk will see “significant inflation” in its cost base, which will need to be passed on to customers, with costs rising by 20% to 30% on routes from Asia to Europe or the US east coast.
Clair added that capacity constraints had a positive impact on the Danish shipping giant’s profit margins in the short term and had led to three profit upgrades in recent months.
Maersk Wednesday report Year-on-year basic profit fell to $623 million from $1.346 billion in the second quarter, and revenue fell to $12.77 billion from $12.99 billion.
The company said that despite the year-on-year weakness, ocean freight margins were “significantly better” than in the first quarter of 2024 and the fourth quarter of 2023, with an EBIT margin of 5.6%, compared with -2% and -2% previously. -12.8% in those previous periods.
Maersk shares fell 1.6% at 12:45 noon in London on Wednesday.
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