Container shipping has hit a significant bottleneck with increasing demand

Maersk containers aboard the container ship Hammonia Husum, as it leaves the port of Portsmouth. (Photo by Andrew Matthews / PA Images via Getty Images)

Andrew Matthews | PA images | Getty Images

Container shipping companies are stuck in a “significant bottleneck”, with a resurgence in global demand increasing capacity and increasing freight rates, Maersk CEO Soren Skou told CNBC on Wednesday.

Maersk, the world’s largest container shipping company, marginally exceeded fourth-quarter profit expectations on Wednesday and released an optimistic outlook for 2021 after an “exceptional and challenging quarter”.

Skou explained that after a 15% drop in Maersk volumes in the second quarter of 2020, the strong recovery at the end of the year, especially in the U.S. and Europe, saw global trade return to a 5% increase year over year.

“This caused a significant bottleneck in terms of capacity and containers, which increased freight rates,” said Skou.

Maersk’s shares fell more than 8% at the start of the negotiations.

‘Completely unprecedented’

After removing capacity during the fall in demand in the second quarter, Skou told CNBC that Maersk and other carriers now have their full container capacity deployed again.

“So, we are trying to deal with an increase in demand that is completely unprecedented, both an increase in demand because consumers are spending, but also an increase in demand because a major replenishment has started, since large retailers have actually stopped buying products at Asia in the second quarter of 2020 and well into the middle of summer, “he said.

The Danish company, considered a global trade thermometer, posted quarterly earnings before interest, taxes, depreciation and amortization (EBITDA) of $ 2.71 billion, a fraction above the $ 2.68 billion forecast by analysts, according to a Refinitiv survey.

This marked an increase of 85% over the same period last year, while revenue increased 16% over the previous year, to $ 11.3 billion, as the recovery in demand for goods initiated in the previous quarter continued. accelerated.

The company now expects EBITDA between $ 8.5 billion and $ 10.5 billion in 2021, compared to $ 8.3 billion last year, noting that the outlook continues to be affected by the Covid-19 pandemic and its impact on demand patterns.

In the earnings report, Skou said Maersk is confident that it will continue to increase profits as “the economic situation normalizes in 2021 and beyond”.

“Given the current exceptional situation, in which rising demand has led to bottlenecks in supply chains and equipment shortages, the first quarter of 2021 is expected to be stronger than the fourth quarter of 2020,” the company explained in the report.

Empty containers

Reports emerged in January that shipping companies were rejecting tons of US agricultural exports worth hundreds of millions of dollars in the last quarter of 2020, opting to send empty containers back to China to be supplied with more profitable products.

Meanwhile, a terrible shortage of containers during the resurgence in global demand has caused shipping costs to skyrocket 300% and caused delays in shipping goods from China.

“For carriers, it’s obviously more attractive to have revenue, if you like, in the container in both directions, but obviously, I also heard stories about carriers who decided to return the empty containers and send them back to Asia, instead of wait another week or two to fill it with US exports, “Skou told CNBC’s” Squawk Box Europe “on Wednesday.

He added that Maersk “worked hard” to deliver on promises made to US export customers.

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