Reporting a profit growth of over 600% y-o-y to $1,253m in Q1, Danish shipping giant AP Moller-Maersk’s leadership seems to believe that the Red Sea situation is likely to be more impactful than any China/US trade spat. Revenues grew 7.8% y-o-y to $13,321 in the period, led in a large part by the growth in its Ocean segment shipping income.
Ocean – Red Sea conflict the big issue
In the Ocean segment, global volumes increased 0.1% y-o-y to 2.931m forty foot equivalent units (FFEs) but the rate in USD per FFE grew 2.5% to $2,427. This helped the segment’s income grow 11.2% y-o-y to $8,910.
Maersk CEO Vincent Clerc said that Q-o-Q freight rates have declined even as y-o-y rates have improved. “We experienced a continuously declining rate environment since mid-2024 which continued through the first quarter in line with our expectations. Under these circumstances, we delivered on our planned profitability. Our utilisation remains high in the 90s, while slight sequential downtick following normal seasonality. Contracts have provided some stabilising effect, and our focus enabled us to roll back inflationary pressure on some of our cost items.”
The Red Sea route between Asia and Europe is still closed and this initially impacted freight rates that peaked in July. Clerc said that this is unlikely to change in the foreseeable future: “I want to remind you first of all that there is a strong link between what’s going on in Yemen and what’s going on in Gaza and in that conflict. Given at least the expectations that things are or given what we’re seeing every day and the expectation that it’s worsening on the ground in Gaza and that things could worsen even further, then I think that today going through something as complex, costly and hard to reverse as a complete redeployment of our shipping networks to go back through the Red Sea based on a news of a deal whose contour we don’t understand, whose terms we don’t understand and who has been breached already, I think is really is not responsible. So for me, this thing around the Houthis, if the US Will stop bombing them, that’s good. But whether this means that there is not only safety today, but there is safety for the foreseeable future in us sending our colleagues, our assets and our customers’ cargoes to the Red Sea again, we’re pretty far from that threshold.”
By comparison, he said that the ongoing trade dispute between China and the US is having relatively little impact: “It is important to note that China-US volumes only make up 5% of our total, while the remaining 95% comprising the rest of the world continues with unchanged demand.”
Logistics – US re-organisation impacts revenues as profits grow
Less than a quarter in size of the Ocean segment by revenue but still generating $3,488m in the quarter (-0.5% y-o-y), the Logistics segment still saw EBIT improve by 163% to $142m. Clerc continued, “This steady margin uplift we have seen in the recent quarter owes itself to the continued operational improvements we have made in Middle Mile also known as Maersk Ground Freight and Last Mile as well as the productivity gains across the entire Logistics and Services portfolio. Revenue remained stable year on year with volume growth across most product, while Air and Middle Mile we took targeted actions to rebase those businesses to focus on margin in favour of revenue.”
The company is refocusing its Last Mile and Middle Mile business in North America, and at the same time its Warehousing and Fulfilment revenue improved due to new customer wins. In the Transported by Maersk freight forwarding sub-segment, volumes dropped in air and ocean forwarding but rates increased, leading the business to retain a broadly 0% y-o-y growth at $1.6bn.
As the largest shipping company in the world, Maersk is naturally buffeted by changes in global trade, but its exposure is more between Asia and Europe so its focus is more on that resolution than those competitors that do transpacific routes. This does mean longer sailings via Good Hope and having to plug capacity gaps in order to maintain volumes, but it has managed the issue well. The stormy seas may abate sooner on the transpacific trade lanes with the Asia-Europe lanes affected by a 100 year old geopolitical problem that is far harder to disentangle than one based on the whims of two political leaders.
Author: Richard Shrubb
Source: Ti Insight
Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry.
Visit GSCI subscription to sign up today or contact Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907
For your logistics and transportation management needs
Providing high frequency logistics and supply chain data and analysis for all those invested in the industry.