Facing a barrage of complaints from regulators and exporters over sky-high costs and lengthy disruptions to supply chains, the chief executive of AP Moller-Maersk, the world's largest container shipping company, has spoken out in defence of the sector.
Maersk. Credit: Ed / Flickr
Credit: Ed / Flickr
In an interview with the FT, Maersk CEO Soren Skou said that the coronavirus pandemic has created an "extraordinary situation", with demand nose-diving at the start of 2020, followed by a swift and unexpectedly strong recovery at the end of the year, as online orders skyrocketed and retailers replenished stocks.
Read more: Covid-19 creates "perfect storm" for global container shipping
Criticism of the situation has been especially strong among US regulators, who have launched an inquiry into the industry. Meanwhile, exporters have been complaining to the EU about the savage and unanticipated rises in the costs of freight, with contracts being unilaterally broken.
"When rates spike, it attracts attention from regulatory authorities. And it has done that here," Skou told the FT.
"As an industry, we have been investigated by everybody over the last five years — the [US] DoJ, the EU, China, Russia. There’s no evidence of any wrongdoing or anything that shouldn’t be going on," he added.
Freight rates between China and Europe quadrupled in the last two months of 2020, creating shortages of a wide range of consumer goods.
During the 2008-2009 financial crisis, shipping groups suffered heavy losses. The response was to consolidate, ending in the formation of three major alliances covering all the largest companies. However, this has led to complaints by exporters about the power these alliances now wield.
Skou emphasised that the sudden and steep rises in freight rates were a result of the demand's own recovery and that the situation had taken many in the industry by surprise. He added that the situation should improve as 2021 progresses.
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"It’s an extraordinary situation where you have a massive drop in demand and then at the end of the year, all that demand comes back. The ships don’t become larger because the demand increases," he said.
Skou's remarks come as Maersk reported its 2020 Q4 EBITA as having almost doubled - an increase of 85% to $2.7 billion (€2.23 billion) - with the forecast that this year will be even better. However, shares dropped by 8% earlier today with investors concerned that rates have now hit their peak and will normalise after a record first-quarter this year.
The Maersk chief said that the container shipping sector's "very strong" performance at the end of 2020 was "a little bit of a sideshow". Instead, he highlighted that despite the pandemic Maersk had seen four consecutive quarters of growth in earnings, leaving the company with "plenty of firepower" for acquisitions.
He added that the pandemic had made giving guidance difficult, but that Q1 2021 was forecast to be stronger than the Q4 2020 "record".
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