Maersk warns economic impact of Iran conflict could last for months

Maersk warned that the impact of the closure of the Strait of Hormuz will increasingly be felt in global trade in the coming months, as concern grows over a possible collapse in consumer demand.

The Danish group, regarded as the world’s second-largest container shipping company, said its costs have risen by $500 million a month because of disruptions in the strait, but that it has so far been able to pass those costs on to customers through higher freight rates.

Maersk Chief Executive Vincent Clerc said he remains cautious because of the “significant increase in our cost base” expected in the second quarter.

He told Bloomberg TV: “There is a lot of uncertainty when we look further into the year as to what the secondary impacts of this war will be: inflation, a possible reduction in demand. There are some question marks over how this will ultimately feed through into the economy.”

His comments carry weight because Maersk is seen as a bellwether for global trade, transporting one in every five seaborne containers.

The remarks came as Maersk reported first-quarter results that beat expectations, helped by the limited effect of the Iran war on the first three months of the year. The Danish group maintained its financial guidance for the year, including projected container demand growth of 2% to 4%, but acknowledged that risks are tilted to the downside.

Clerc said he is concerned about the possibility of weaker consumer demand as higher energy prices weigh on household budgets.

If that happens, Maersk is prepared to adjust its schedules, forcing its vessels to sail more slowly to use less fuel, alongside other cost-cutting measures.

“This is on a different scale from what we have seen before, but the mechanics are quite similar to what we saw in previous oil shocks,” he added.

Maersk reported a 2% drop in revenue to $13 billion in the first quarter, while operating profit fell by nearly three-quarters to $340 million. The company maintained its full-year operating profit guidance of between a $1.5 billion loss and a $1 billion profit.

The group had already warned that new vessels ordered, mainly by competitors, after the post-pandemic boom in container shipping would weigh heavily on profitability this year.

Clerc added that the main effect of Hormuz is not on trade itself, since only about 2% to 3% of global container volumes have been directly affected, but on secondary economic effects through higher oil prices.

Maersk shares were down 4.5% at 14,535 Danish crowns in morning trading.

Source: Folha de São Paulo

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