What the Maersk and Norden numbers are telling everybody else
To paraphrase the poem about the little girl who had a little curl, when things in shipping are good they are very very good. And when they are bad they are horrid
Our lifetimes may never again see an era in which sailing vessels from A to B generates returns that make Gates, Zuckerberg and Bezos envious
ON THE yardstick of money made per employee, AP Moller-Maersk was the sixth most profitable company in the entire European Union last year, outperforming mid-life crisis motor manufacturer Ferrari, fancy handbag brand Hermes and British American Tobacco.
But 2022 was all of 11 months ago. Third-quarter results released by what is still the world’s best-known — if no longer largest — shipowner unveiled a bottom-line implosion, representing a 94% decline on the phenomenal $9.4bn recorded last time round.
Given the exceptional nature of the comparator, that’s not as much of a meltdown as it looks. Not too long ago, word that the Danish giant stood $691m in the black in the three months to the end of September would have been hailed more as harbinger of miracle than ominous portent.
In the decade leading up to 2020, liner shipping was widely seen as a low-margin game for high school losers until, for one glorious moment, coronavirus changed everything.
In just three years, boxship operators raked in more cash than they had in the entire previous 63-year history of container shipping.
During this brief richer-than-Croesus interlude, liners were money spinners of magnitude exceeding the famous FANG quartet of Facebook, Amazon, Netflix and Google put together.
Now the era of Covid-19 is receding into memory, and Maersk’s Q3 numbers are clear proof that the fun is over. For nobody will the hangover hurt more than the Maersk employees who will lose their jobs as a result.
The headcount, which stood at 110,000 in January, is already down by 6,500 since that point, with at least a further 3,500 posts to go. The shakeout is projected to save $600m.
The obvious question is, what now? The prognosis seems to be that a lean spell is now upon us, with Maersk chief executive Vincent Clerc predicting continued pressure for the next two years, including a fall of up to 2% in global container volumes in 2024.
His reasoning is easy to see. On top of rising political tensions in the Middle East, northwest Asia and the Black Sea and pressure from regulators on both sides of the Atlantic, most projections point to a coming slowdown in world trade.
The company’s Q3 profits, at $99m, are a far cry from the $243m seen in the corresponding period last year. Rindbo has already written next year off as a bust for dry bulk, again citing macroeconomics and geopolitics as reasons not to be cheerful.
But he did manage to offer a sliver of optimism for 2025, pointing to dry cargo fundamentals including a low orderbook and potential growth in demand. When it comes to tankers, he went on, the stakes are high, and Norden is minded to “take a little bit of that money off the table”.
Shipping is the ultimate cyclical business, as those who recall the happy days of the supposedly never-ending ‘super cycle’ we were said to be living through before the global financial crisis will just about recall.
To paraphrase the nineteenth century poem about the little girl who had a little curl, when things are good they are very very good. And when they are bad they are horrid.
Sadly, it looks unlikely that our lives will ever again see an era in which sailing vessels from A to B generates returns that make Gates, Zuckerberg and Bezos envious.
For those in the thick of it, the last few years will be something to tell their grandchildren about. Assuming they survive the employment cull, of course.
The thing with rollercoaster rides is that they only provide temporary exhilaration. The essential task of transforming shipping into a dependable dull industry that provide shippers with a steady service and investors with a steady return on capital remains a distant Holy Grail.