Maersk CEO says shipping slowdown is signaling a recession
By Julia Horowitz, CNN BusinessUpdated: Wed, 02 Nov 2022 15:54:25 GMTSource: CNN BusinessThe spike in shipping rates since the onset of the pandemic has been a huge boon for Maersk. But the Danish shiBy Julia Horowitz, CNN Business
Updated: Wed, 02 Nov 2022 15:54:25 GMT
Source: CNN Business
The spike in shipping rates since the onset of the pandemic has been a huge boon for Maersk. But the Danish shipping giant is warning its business will have to endure tougher times soon.
The company said Wednesday that a looming global recession is expected to reduce container demand by between 2% and 4% in 2022, with "plenty of dark clouds on the horizon."
Shares of Maersk, which are perceived as a barometer of the health of the economy due to the company's exposure to the movement of goods around the world, fell nearly 6%. The stock has dropped 35% so far this year.
While Maersk earned record profits last quarter due to "substantially higher freight rates," it said that rates began to drop toward the end of the period "due to weakening customer demand, coupled with markets beginning to normalize with fewer supply chain disruptions" and less congestion.
Plus, ocean freight volumes are down. CEO Søren Skou told CNN's Julia Chatterley this decline is "clearly a sign that the consumer is not spending as much money as he or she has done in the last few years, and probably also a sign that many of our customers have too much inventory."
Consumption in general, he added, is "weighed down by very, very negative sentiment."
"I'm not a macroeconomist, but I would be surprised if Europe is not in recession by now," Skou said. He thinks the United States is likely to follow "sometime next year."
Demand for bigger goods like televisions, couches or BBQs has also fallen after people made big purchases during lockdowns. Now, they won't need to buy replacements for some time.
"Once you buy that, you probably don't have that demand again for another few years," Skou said.