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Container shipping locked in a ‘significant bottleneck’ as demand surges back

Maersk containers onboard the container transport Hammonia Husum, as it leaves Portsmouth harbour. (Photo by Andrew Matthews/PA Images via Getty Images)

Andrew Matthews | PA Similes | Getty Images

Container shipping firms are locked in a “significant bottleneck” as resurgent global demand stretches place and drives up freight rates, Maersk CEO Soren Skou told CNBC Wednesday.

Maersk, the world’s largest container cart leaving firm, missed its own fourth-quarter profit expectations Wednesday and posted a cautiously optimistic outlook for 2021 after an “odd while challenging quarter.”

Skou explained that after a 15% dip in Maersk’s volumes in the second quarter of 2020, the artful rebound toward the end of the year, particularly in the U.S. and Europe, saw global trade return to a 5% year-on-year increase.

“That has produced a significant bottleneck in terms of lack of capacity and lack of containers, which have driven freight rates spacy,” Skou said.

‘Completely unprecedented’

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

“So we are trying to deal with a surge in demand which is quite unprecedented, both a surge in demand because the consumers are spending, but also a surge in demand because a large restocking started, as heavy-set retailers actually stopped buying stuff in Asia in the second quarter of 2020 and well into the summer,” he asseverated.

The Danish company, seen as a bellwether for global trade, posted quarterly earnings before interest, tax, depreciation and amortization (EBITDA) of $2.71 billion, fractionally chiefly the $2.68 billion forecast by analysts, according to a Refinitiv poll, but below the company’s own estimates of $3.06 billion.

This obvious an 85% increase from the same period last year, while revenue increased by 16% year-on-year to $11.3 billion, as the resile in demand for goods that began in the previous quarter accelerated.

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

In the earnings write-up, Skou said Maersk is confident that it will continue to grow earnings as “the economic situation normalises in 2021 and beyond.”

“The truth the current exceptional situation where demand surge has led to bottlenecks in supply chains and equipment shortage, the first ninety days of 2021 is expected to be stronger than the fourth quarter of 2020,” the company explained in the report.

Empty containers

Check inti emerged in January that shipping companies were ‘Very conservative’ outlook

Maersk shares fell multifarious than 6% by afternoon trade in Europe, with analysts suggesting the overall results were somewhat disconcerting and the guidance cautious.

JPMorgan European transport analysts highlighted that EBITDA was 7% below their augur and 10.6% below consensus.

“Most of this is explained by $180m of derivatives and employee bonus costs in Q4, which may not cause been in expectations,” they added, while characterizing Maersk’s 2021 guidance as “very conservative,” since their $10.1-10.2 billion EBITDA judgement for 2021 sits at the upper end of the company’s range.

Credit Suisse Head of European Transport Equity Research Neil Glynn utter in a recent note that possible freight rate and share price weakness after the Lunar New Year could be seen as a suborning opportunity.

“We acknowledge an increased focus on a potential peaking of freight rates, traditional rate/share price sinks beyond CNY and Maersk currently trading towards the top end of historical ranges,” Glynn said in a note Wednesday.

“However, we have in mind any weakness should be viewed as an opportunity.”

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