ICYMI: Shipping giants are sending out an unlikely warning signal about the global economy, writes edwardcropley
The cargo ship "Maersk Bratan" of Danish shipping company Maersk is loaded at a container terminal at the harbour in Hamburg, Germany, June 24, 2022. REUTERS/Fabian BimmerLONDON, Aug 2 - Shipping giants are sending out an unlikely warning signal about the global economy. Danish behemoth A.P. Moller-Maerskon Tuesday it would probably land a whopping $37 billion of EBITDA this year due to sky-high freight rates.
Container operators have been one of the biggest beneficiaries of pandemic-related disruptions. With port closures throwing ocean timetables – and thus global supply chains – into disarray, freight rates have soared as companies fork out hefty premiums to secure berths. Last September, the average cost of moving a container from A to B was $11,000, compared to around $1,300 in 2019, according to forwarder Freightos.
Getting the global logistics system back on an even keel thus ran counter to Maersk’s short-term interests. Happily for its shareholders, this hasn’t happened as quickly as expected, mainly due to extended lockdowns in Chinese commercial hubs like Shanghai. Maersk Chief Executive Soren Skou is now predicting $37 billion of EBITDA this year, against a previous forecast of $30 billion.
The most likely explanation is a precipitous correction in freight rates, triggered by a global recession. Investors may be a little too bearish. JPMorgan analysts value Maersk’s logistics and terminals unit at $30 billion, and reckon Skou can return $26 billion of cash to investors in coming years. If so, its core freight business, which generated 79% of last year’s $62 billion of revenue, is valued at zero, the bank said in a May report.
The Danish shipping group said it now expected $37 billion of underlying EBITDA this year, versus a previous forecast of $30 billion.Register now for FREE unlimited access to Reuters.com
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