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A.P. Moller-Maersk Sees Rough Waters Ahead for Ocean Shipping
November 22,
2022 by HFBusiness Staff in Business Strategy, Industry 
A.P. Moller-Maersk A/S expects logistics revenue to surpass the ocean business by the middle of the decade as the container giant warns of “dark clouds on the horizon” for global shipping demand.
Maersk Chief Executive Søren Skou said that the Denmark-based company, one of the world’s largest container lines by volume, is maintaining its focus on transforming from mostly an ocean shipping operator to becoming a global logistics juggernaut.
Mr. Skou said the strategy should help insulate Maersk from the boom-and-bust cycles of the container industry. “Our strategy is not to gain market share in ocean,” Mr. Skou said. “It is to gain share in our customers’ wallet of logistics spend.”
Ocean carriers are facing a sharp reversal in fortunes. Demand for space on container ships during the pandemic drove hundreds of billions of dollars in profits for the world’s largest ocean carriers. This year, shipping volumes and rates are plunging as consumers pull back on spending amid rising inflation and a war in Ukraine that has triggered a global energy crisis.
“It is clear that freight rates have peaked and started to normalize during the quarter, driven by both decreasing demand and easing of supply chain congestion,” Mr. Skou said.
Contract negotiations in the next year will be heavily influenced by spot rates, and won’t protect Maersk from a broader downturn in trade demand. “When the customers themselves suffer from the effects of economic decline, volume can’t be conjured out of the thin air,” Mr. Skou said.
Maersk officials point out that importers and exporters spend eight to nine times more on domestic logistics, such as trucking, warehousing and delivery, than on international ocean freight.
The company has made a series of acquisitions in logistics and inland transport in recent years, capped by the $3.6 billion purchase completed in August of LF Logistics, the Hong Kong-based contract logistics arm of supply-chain giant Li & Fung
Maersk’s logistics revenues reached $4.2 billion in the most recent quarter, which included one month’s revenues from the LF Logistics acquisition. Ocean revenue in the same period surpassed $18 billion.
“We are well on the way towards a significant market position in the logistics industry,” Mr. Skou said. “And at some point, in this decade, probably around the middle of the decade, we expect our logistics revenue to surpass that of ocean.”
Source: Wall Street Journal