Shipping Firm Maersk Expects Supply-Chain Snarls to Ease This Year

Date: Thursday, February 2, 2022
Source: The Wall Street Journal

Danish container-ship company A.P. Moller-Maersk AMKBY 0.58% A/S said it expects supply-chain bottlenecks to last until June and sealed a $1.68 billion deal to help shore up its inland-distribution business.

Maersk, which moves 17% of the world’s shipping containers on its vessels, said Wednesday that the buyout of U.S.-based Pilot Freight Services will bolster its ability to move big and bulky freight in North America. Pilot operates a network of 87 inland hubs and works with third-party trucking providers to move freight to customers.

“Our customers need to move their products from a factory in China to a distribution center and all the way to a consumer’s front door,” Maersk Chief Executive Soren Skou said in an interview. “Pilot Freight will help us add new services within the fast-growing big and bulky e-commerce sector.”

Maersk shares rose 3.2% in trading on the Nasdaq Copenhagen exchange.

The buyout is the latest in a series of acquisitions for Maersk and its competitors, such as CMA CGM SA of France, as they morph into end-to-end supply-chain providers from primarily handling ocean freight. Maersk in November bought Germany-based freight forwarder Senator International for about $644 million and LF Logistics, the warehousing arm of supply-chain manager Li & Fung Ltd., in December for $3.6 billion.

Container-ship operators have enjoyed strong profits over the past two years, as port bottlenecks and growing consumer demand for manufactured goods helped them raise freight rates to record levels.

And while conditions have helped Maersk, Mr. Skou said he expects supply issues to continue through the first half of this year and gradually ease thereafter. He said demand for manufactured goods should wane as people return to work and spend more on services like travel and entertainment.

Maersk said it expects global container volume to expand by 2% to 4% this year but noted that uncertainties remain related to congestion, network disruptions and demand patterns.

Dozens of ships continue to be stuck outside major ports such as Los Angeles and Shanghai with loading and unloading operations hit by labor shortages, lack of warehousing space and rattled rail and trucking networks.

The company had record-high growth and profitability but also faced  supply-chain disruptions and severe challenges for our customers, he said.

In its report Wednesday, Maersk said revenue at its shipping unit rose 77%, driven by higher freight rates as demand remained elevated and congestion persisted across global-supply chains.

However, that increase in revenue was partially offset by higher costs from handling goods, including a 71% rise in fuel costs.

Overall, shipping volumes slipped 4%, Maersk said. Freight rates in the quarter rose 83% from a year earlier.

Looking ahead, Maersk said it expects full year 2022 underlying earnings before interest, taxes, depreciation and amortization of around $24 billion.


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