THE global shipping industry is contending with falling freight rates, weak consumer demand and too many ships with Danish shipping giant AP Moller-Maersk last week reporting steep falls in profits and revenues in the third quarter compared to last year.
With shipping markets in a swirl, groups like Maersk have few options but to batten down the hatches, cut costs and preserve cash. Maersk said it may even scrap a share buyback scheme planned next year, according to London's Financial Times.
The shares reacted with an 18 per cent dip, extending the total losses from last year's peak to 60 per cent. Shareholders will have to accept lower returns as the market rebalances in the next few years, though Maersk is far from financially distressed. Its net cash position has halved since the end of 2022 but is still almost US$7 billion.
Shipping knows the story of boom and bust all too well. The pandemic exaggerated the former as supply chains broke down and freight rates soared to new records. The industry reacted by placing record orders for new ships, encouraged by the demand for cleaner, greener vessels.
Net of scrappage, the global fleet might grow by 6.4 per cent in 2024, thinks consultancy Drewry. 'Record oversupply of up to 25 per cent will continue to push freight rates lower next year,' argues Philip Damas, head of Drewry Supply Chain Advisors.
Weak demand adds to the pain and Maersk expects volumes to be as much as 2 per cent lower this year.
Earnings will remain under pressure as freight rates fall. Analysts expect the company to make a net loss next year.
SeaNews Turkey
With shipping markets in a swirl, groups like Maersk have few options but to batten down the hatches, cut costs and preserve cash. Maersk said it may even scrap a share buyback scheme planned next year, according to London's Financial Times.
The shares reacted with an 18 per cent dip, extending the total losses from last year's peak to 60 per cent. Shareholders will have to accept lower returns as the market rebalances in the next few years, though Maersk is far from financially distressed. Its net cash position has halved since the end of 2022 but is still almost US$7 billion.
Shipping knows the story of boom and bust all too well. The pandemic exaggerated the former as supply chains broke down and freight rates soared to new records. The industry reacted by placing record orders for new ships, encouraged by the demand for cleaner, greener vessels.
Net of scrappage, the global fleet might grow by 6.4 per cent in 2024, thinks consultancy Drewry. 'Record oversupply of up to 25 per cent will continue to push freight rates lower next year,' argues Philip Damas, head of Drewry Supply Chain Advisors.
Weak demand adds to the pain and Maersk expects volumes to be as much as 2 per cent lower this year.
Earnings will remain under pressure as freight rates fall. Analysts expect the company to make a net loss next year.
SeaNews Turkey
