Shipping giant Maersk, considered a barometer of global trade, sees no signs of a recession in the United States as demand for cargo remains robust, the company's CEO said on Wednesday.
“We have actually seen in recent years [the shipping container] “The market remains surprisingly resilient despite all the recession fears,” Vincent Clerc told CNBC's “Squawk Box Europe” on Wednesday, adding that container demand in general is a good indicator of underlying macroeconomic strength.
U.S. inventories – goods stored before delivery or processing – “are higher than they were at the beginning of the year, but they are not at levels that cause concern or indicate an imminent significant slowdown,” Clerc said, although he noted some unpredictability in the numbers of companies replenishing their inventories.
“We're also looking at the orders from many retailers and consumer brands that need to import supplies into the U.S. for the coming month, and those still seem to be quite robust… at least the data and indicators that we have still seem to suggest some level of confidence that current levels of consumption in the U.S. will continue.”
Last week, concerns about a recession in the world's largest economy, the United States, suddenly increased following the release of a series of weaker-than-expected labor market data that caused disagreement among economists and market participants.
U.S. retail inventories – a measure of unwanted inventory – rose 5.33% year-on-year to $793.86 billion in May, according to the latest release from the U.S. Census Bureau.
A report published on Wednesday by leasing platform Container xChange said indicators suggested inventory levels were higher than demand, meaning less “prosperous times” in the coming months for container traders, the logistics market and retailers who had stockpiled inventory.
Maersk's Clerc said the company had been surprised by the resilience of container sales in recent years and expected this trend to continue in the coming quarters. There were also no signs that the global economy was heading for a recession.
Chinese exports have been the driving force behind strong container sales as the global share of containers originating in or bound for China has increased, he continued.
The Danish company had a much gloomy outlook for 2022, warning of a decline in demand due to inflation, the risk of a global recession, the European energy crisis and the war in Ukraine.
A combination of these factors led to falling freight rates in 2023 and thus a collapse in Maersk's profits.
This trend was partially reversed this year as geopolitical tensions in the Red Sea continued to rise, forcing shipping companies to reroute their trade routes around the southern coast of Africa, increasing travel times and taking capacity away from the global system.
The Red Sea causes further inflation
Clerc told CNBC on Wednesday that he expects the Red Sea diversions to continue at least until the end of the year.
“Of course, that requires more capacity, more ships to handle global trade around the world, and that has led to some bottlenecks here in the second and third quarters that we are currently struggling with,” he said.
“This means higher costs in the short term and we have had to incur significant costs as a result, both because we need more ships and more containers to do the work expected of us.”
If the situation continues, Maersk will experience “significant inflation” in its cost base, which the company will have to pass on to its customers, he continued. For example, routes from Asia to Europe or along the east coast of the USA will cost between 20 and 30 percent more.
The short-term impact of the capacity restrictions has had a positive impact on the Danish shipping giant's margins and led to three profit increases in recent months, Clerc added.
Maersk on Wednesday reported a year-on-year decline in adjusted profit to $623 million from $1.346 billion in the second quarter, and a decline in revenue to $12.77 billion from $12.99 billion.
Although weaker on an annual basis, margins in the ocean freight business were “significantly better” than in the first quarter of 2024 and the fourth quarter of 2023, according to the company, with an earnings before interest and taxes margin of 5.6%, compared to -2% and -12.8% in the previous periods.
Maersk shares were trading 1.6 percent lower at 12:45 p.m. in London on Wednesday.
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