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US-China trade war hit demand for container shipping says Maersk

posted onNovember 15, 2018

Danish conglomerate A.P. Moller-Maersk beat third-quarter operating profit forecasts on Wednesday but said trade restrictions between the US and China had hit demand for container shipping. 

The Copenhagen-headquartered company recorded progresses in its strategic business transformation, reporting growth in both Ocean and non-Ocean with a total revenue increase of 31% to USD 10.1 billion in the third quarter of this financial year, 12% excluding Hamburg Süd, the German container line it acquired in 2017. Growth in non-Ocean was at 15%, which now contributes 31% of total revenue.

“Well into our transformation, we are progressing with the integration of our business to better serve customers and unlock the full growth potential within Logistics & Services. As a result, I am pleased to see revenue growth in Q3 across the business, including supply chain services. Our profitability and cash flow is improving, positively impacted by the emergency bunker surcharge announced due to the significant increase in bunker price, synergies from Hamburg Süd and strong collaboration between Ocean and our terminal activities,” Søren Skou, CEO of A.P. Moller – Maersk said in a statement. 

In its market update, the company said global container trade continued to lose momentum in Q3 2018, with growth down to around 2.7% compared to Q3 2017, as the trade war between Washington and Beijing escalated. In Q3 2018, the U.S. Administration slapped duties on $200bn of Chinese imports and China immediately hit back at President Donald Trump by announcing new trade tariffs on $60bn of US goods. Together, these new initiatives amount to around 2.6% of global value of traded goods.

“The impact on global trade remains uncertain, but we estimate that the combined eff ect of all trade restrictions introduced during 2018 could reduce global container trade by 0.5-2.0% during 2019-2020” Maersk said. 

Year-to-date, global container trade has increased by 4.2% compared with the same period last year, a much slower pace of growth than the 5.8% recorded in 2017.

Maersk was established in 1904 in Svendborg by captain Peter Mærsk Møller (1836–1927) and his son Arnold Peter (A. P.) Møller (1876–1965). It is an integrated transport and logistics company with multiple brands and a global leader in container shipping.

The 114-year-old company is based in Copenhagen with subsidiaries and offices across 130 countries and around 76,000 employees. Maersk carries millions of tons of cargo every single day while its vast network covers 343 ports in 121 countries. 

The emblem of the company is a white seven pointed star, created by Arnold. His father who was a deeply religious Christian, attached a blue banner with the white seven pointed star on both sides of the black chimney on the steamship Laura when his wife recovered from illness. In a letter to his wife, P. M. Møller explained in October 1886, "The little star on the chimney is a memory of the night when I prayed for you and asked for a sign: If a star would appear in the gray and cloudy sky, it would mean that the Lord answers prayers." 

The company's 2017 annual revenue was US$35 billion. Shares in the company finished Wednesday's session down by 0.27 percent.