Shipping giant Maersk cuts 10,000 jobs and warns about global trade

Shipping market 'set to remain weak until about 2026'

Maersk, which transports about one-sixth of the world’s containers, prepared for things to sour, seeking to lock in many of its big customers on long-term contracts back when rates where higher to ease the impact of freight-rate volatility.

Shares in Maersk, a bellwether for global trade, fell after saying it is cutting at least 10,000 jobs to shield its profitability in a shipping market that is set to remain weak until about 2026.

Maersk shares extended declines to more than 16% at one stage, the lowest in three years. “If you look at the order book and what is going to come over the next couple of years, I think we’re probably settling in for a very subdued and pressured environment for two to three years ahead,” chief executive Vincent Clerc said in an interview. 

The job cuts, equivalent to almost 10% of headcount, are prompted by lower freight rates and increased competition in marine transport. About 6,500 of those positions have already been eliminated, Mr Clerc said. 

Maersk, which transports about one-sixth of the world’s containers, prepared for things to sour, seeking to lock in many of its big customers on long-term contracts back when rates where higher to ease the impact of freight-rate volatility. The Danish company is also spreading its focus to cover land-based container logistics, where profit margins traditionally have been higher than at sea.

Maersk expects to save $600m (€566m) through the job cost measures, and the Copenhagen-based company will also put its 2024 share buyback programme under review and reduced its estimate for capital expenditure in 2023 and 2024.

Container lines are facing an abrupt drop in earnings after record profits in 2021 and 2022 when high demand for consumer goods during the pandemic, coupled with limited vessel supply, drove freight prices higher. 

This year, global economic growth has lost steam and companies are working through existing inventories instead of transporting new goods to Europe and the US. At the same time, an oversupply of vessels is building up on the market.

Maersk’s earnings before interest, tax, depreciation and amortisation fell more than 80% to $1.88bn in the third quarter, meeting analyst estimates.

Global container trade will probably decline 0.5% to 2% this year, Maersk said, compared with its previous prediction of a contraction of 1% to 4%. The downturn in the industry is set to be deeper and longer than the market expects, Goldman Sachs analysts warned in a research note last month, repeating a recommendation to sell Maersk stock. 

Bloomberg