Maersk sees drop in global container demand this year as supply chains hit

Containers from shipping giant Maersk piled up in the freight yard of Berlin’s Behala west harbour in February. (AFP)
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Updated 14 May 2020

Maersk sees drop in global container demand this year as supply chains hit

COPENHAGEN: Shipping group A.P. Moller-Maersk on Wednesday warned of a sharp drop in global container volumes due to the coronavirus pandemic, sending its shares down sharply.

The coronavirus epidemic has thrown the global container shipping trade off balance as global supply chains have been upended and businesses and factory activity in China and later across the world were disrupted.

Maersk, which also reported a 23 percent rise in first-quarter core profits, now expects global container demand to contract this year, after previously forecasting growth of 1-3 percent.

“As global demand continues to be significantly affected, we expect volumes in the second quarter to decrease across all businesses, possibly by as much as 20-25 percent,” Chief Executive Soren Skou said in a statement.

Maersk shares were more than 5 percent lower in early trade. The shares have risen by a third since March when they reached their lowest level in more 10 years.

Maersk said that it had canceled more than 90 sailings, or 3.5 percent of total shipping capacity, in the first quarter to deal with the slowdown in trade and keep freight rates from falling.

It expects to cancel some 140 sailings in the April to June period.

Maersk reported earnings before interest, tax, depreciation and amortization (EBITDA) at $1.52 billion, slightly above company guidance provided in March when it suspended full-year guidance due to uncertainty caused by the coronavirus pandemic.

The world’s biggest container shipping company reported revenue of $9.57 billion versus the $9.59 billion forecast by 16 analysts in a poll compiled by Maersk. 

European bank ramps up stimulus package

Updated 05 June 2020

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.