Maersk Warns Against US-China Trade War
A.P. Moller-Maersk, owner of the world’s biggest container shipping line, is worried about the prospects of an impending trade war between the United States and China.
Developments like President Donald Trump’s withdrawal from the Trans-Pacific Partnership cause Maersk executives to sit up and take notice.
That’s because they believe such a prospect would have “a very negative effect on our business,” as A.P. Moller-Maersk CEO Soren Skou put it in a published interview.
This all comes on the heals of Maersk Line, the company’s container carrier and the largest of its kind in the world, posting surprisingly poor numbers for calendar year 2016.
Maersk, which is in the process of a corporate reorganization, reported a full-year loss of $1.94 billion, only the second since the end of World War II, when investment analysts had predicted a profit of $963 million. Maersk Line’s 2016 results showed revenues, at $20.7 billion, 13 percent lower than 2015. Although volumes grew by 9.4 percent in 2016, freight rates sank an average of 19 percent compared to 2015.
With rates expected to improve in 2017, Maersk Line projects an improvement of over $1 billion in profit compared to 2016. Maersk Line expects global container shipping demand to increase between two and four percent in 2017. The company also noted that its 2016 losses were attributable in part to one-time write-offs in its energy business.
Maersk’s annual report stated that the fourth quarter of 2016 saw the first time demand outgrew supply since 2010. Also in the offing for 2017, is the completion of Maersk’s acquisition of Hamburg Süd, announced in December 2016, with supports the carrier’s growth strategy in the north-south trades.
Maersk’s terminals operator, APM Terminals, also saw volumes rise and profits sink. APMT handled 37.3 million TEU last year, an increase of 3.7 percent on the previous year, but reported a loss, with profits dipping 33 percent.
The 2M Alliance, Maersk’s partnership with Mediterranean Shipping Company, is seen as key for Maersk Line going forward, but new, larger rivals are set to challenge 2M and create challenges. The Ocean Alliance, comprising four container carriers – CMA-CGM, China Cosco, Evergreen, and OOCL, and THE Alliance, made of five carriers – Hapag-Lloyd, K Line, MOL, NYK, and Yang Ming – are both to begin operations in April.