Container shipping stuck in significant bottleneck as demand increases

Container carriers are stranded in a “significant bottleneck” as resurgent global demand expands capacity and pushes freight rates up, Maersk CEO Soren Skou told CNBC on Wednesday.

Maersk, the world’s largest container shipping company, slightly exceeded fourth-quarter profit expectations on Wednesday and released an optimistic outlook for 2021 after an “exceptional but difficult quarter.”

Skou explained that after a 15% drop in Maersk volumes in the second quarter of 2020, the strong rebound towards the end of the year, especially in the United States and Europe, saw global trade return to an increase. 5% year over year.

“This created a major bottleneck in terms of lack of capacity and lack of containers, which pushed freight rates up,” Skou said.

Maersk shares fell more than 8% in early trading.

After cutting capacity during lower demand in the second quarter, Skou told CNBC that Maersk and other carriers have once again rolled out full capacity of their containers.

“So we are trying to deal with a surge in demand that is totally unprecedented, both a surge in demand because consumers are spending, but also a surge in demand as a large replenishment has started, the big retailers having actually stopped buying products in Asia in the second quarter of 2020 and well into the summer, ”he said.

The Danish company, seen as an indicator of global trade, posted quarterly profit before interest, taxes, depreciation and amortization (EBITDA) of $ 2.71 billion, slightly above the $ 2.68 billion forecast by the analysts, according to a Refinitiv poll.

This is an increase of 85% from the same period last year, while revenues increased 16% year-over-year to $ 11.3 billion , while the rebound in demand for goods that started in the previous quarter accelerated.

The company now forecasts EBITDA of between $ 8.5 billion and $ 10.5 billion in 2021, up from $ 8.3 billion last year, noting that the outlook continues to be affected by the Covid-19 pandemic and its impact on demand models.

In the earnings report, Skou said Maersk is confident he will continue to increase profits as “the economy normalizes in 2021 and beyond.”

“Given the current exceptional situation where surging demand has resulted in bottlenecks in supply chains and a shortage of equipment, the first quarter of 2021 is expected to be stronger than the fourth quarter of 2020” , the company explained in the report.

Reports emerged in January that shipping companies were rejecting tons of US agricultural exports worth hundreds of millions of dollars in the last quarter of 2020, preferring to send empty containers back to China to be filled with more profitable goods. .

Meanwhile, a crippling container shortage amid resurgent global demand has pushed up shipping costs by 300% and caused delays for goods shipped from China.

“For carriers obviously it’s more appealing to have revenue, if you will, in containers back and forth, but clearly I’ve also heard stories of carriers deciding to return empty containers and send them back. in Asia, rather than sending them back to Asia, wait a week or two more to stock up on exports from the United States, “Skou told CNBC’s” Squawk Box Europe “on Wednesday.

He added that Maersk had “worked hard” to keep promises made to US exporting customers.