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A.P. Moller-Maersk A/S, the world’s largest owner of container ships and one of the best bellwethers for global trade, lowered its outlook for the growth of 2022 global container demand and warned next year could be worse. 

Maersk’s warning about a slowdown in container demand and economic turmoil ahead was conveyed in a third-quarter earnings report released today and in an interview by the company’s top executive on Bloomberg

The Copenhagen-based company lowered its outlook for the growth of 2022 global container demand to decline 2-4% from the previous estimate of plus or minus 1%. The forecast sent Maersk’s shares tumbling nearly 6%. 

“However, it is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion. As anticipated all year, earnings in Ocean will come down in the coming periods,” Maersk wrote in the earnings report.

“There are plenty of dark clouds on the horizon,” the company continued, adding, “this weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.”

It then warned: “With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession.”

Maersk CEO Soren Skou joined Bloomberg TV this morning for an interview where he said, “it’s really hard to be very optimistic with a war on our doorstep and a bigger energy crisis this winter so that is impacting consumer confidence and therefore also demand.” He added:

“Global trade is moving backward this year.” 

The company expects the global container market to be “broadly flat to negative” as risks in 2023 are “skewed to the downside” due to the macroeconomic headwinds. Skou noted in the interview that it is “clearly better for the economy and for our customers” to have lower freight rates. 

In May, we outlined that a reversal of the “shortage of everything” bullwhip effect was nearing, as skyrocketing inventories (the result of Covid-era overordering due to snarled supply chains) was about to hit a faltering economy, and prices of goods would decline as companies would be forced to liquidate excess inventories into a recession (see “Bullwhip Effect Ends With A Bang: Why Prices Are About To Fall Off A Cliff” from May 23). We reminded readers about this a few times over the summer (“Bullwhip-Effect Reversal Is The Major Downside Growth Risk” and “Container Rates Slump As “Bullwhip Effect” Enters Terminal Phase”). 

Companies across the board are bloated with inventories. This can be shown in the inventory-to-sales ratio, reaching multi-decade highs — forcing importers to reduce shipments from overseas suppliers

As importers are stuck with inventory, they have reduced orders from overseas manufacturers, which has led to a plunge in container spot rates. Even to the extent that major shipping companies are canceling sails. 

Maersk’s warning comes as central banks are engaged in the most aggressive interest rate hikes in decades to quell inflation. Any overtightening could spark a global recession next year. 

Perhaps, JP Morgan’s consolidated manufacturing PMIs suggest mounting recession risks and declining price pressure are a big theme in 2023.  



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