Maersk issues warning over stagflation and Chinese factory closures

AP Møller-Maersk has warned of growing economic risks including potential stagflation and Chinese factory closures even as the world’s largest container shipping group by profits reported a record quarter.

Maersk’s chief executive Søren Skou said the current second quarter was developing very much in line with the first three months, which brought the highest profits in the Danish group’s 114-year history.

But he added: “We are assuming a slowdown in the second half, a normalization. The visibility is quite low. Mainly we see risks building up in the economy, in China with the Covid-19 policy, where they use these very hard lockdowns, some downgrades due to a very high oil price.”

Maersk, which transports more than one in every six containers over the seas and is considered a global trade bellwether, last week downgraded its growth forecast in the shipping industry this year to a potential small fall.

It also upgraded its profit forecast for this year to $24bn of underlying operating profit, up from its February estimate of $19bn. Skou stressed the new guidance was based on a “sharp decline” in freight rates in the second half so “we have quite some ability to weather a bit of a storm”.

Maersk was suffering from negative volumes due to a “mind-blowing” sixth week of lockdowns in Shanghai, although it had not yet been dramatic, Skou said. But he added: “What everyone fears is that you get a big spread of Omicron that forces China to shut factories. We don’t see it yet.”

His comments came as Maersk reported revenues up 55 percent in the first quarter to $19.3bn, while net profit more than doubled to $6.8bn.

Skou said regulators around the globe had investigated the container shipping industry but concluded that high profits were merely down to supply and demand dynamics, although he expected more such probes in the future.

Maersk’s record results came despite operating losses of $718mn from the fallout of Russia’s invasion of Ukraine, including the Danish group leaving behind 20,000 containers in Russia and exiting operations in logistics and port terminals. It completed its last cargo operation in a Russian port on Monday, Maersk added.

Source: Financial Times

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https://www.ft.com/content/d73c23ef-7eb2-4ba5-9a2e-cf336b1adca8

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