300 Container Vessels Laying Idle Outside Ports But Maersk’s Profit Skyrockets

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  • CEO says 300 container vessels unable to offload at ports.
  • Points to shortage of truck drivers.
  • Profit boosted by record freight rates.
  • Expects demand growth to slow next year.

A recent news article published in the Reuters by Stine Jacobsen states that Shipper Maersk says port delays will stretch into new year.

300 container vessels laying idle outside ports

The chaos that has bedevilled global supply chains in recent months will extend into next year.

It will be extending with a lack of truck drivers preventing hundreds of container vessels from offloading goods around the world, shipping group Maersk (MAERSKb.CO) said.

“The whole system has become one gigantic bottleneck,” Chief Executive Soren Skou told reporters on Tuesday.

Skou said the biggest problem preventing containers from leaving ports is a lack of labour, particularly drivers of heavy goods vehicles in the United States and Britain despite salaries having been raised “significantly”.

There are 300 container vessels laying idle outside ports, Skou said after Maersk reported robust third-quarter earnings on the back of record freight prices driven by the supply chain problems as the global economy recovers from the coronavirus crisis.

Lower volumes

To meet the rising demand, Maersk said it has added more capacity but this could not offset the port congestion that sent third-quarter container volumes down 4% from the same period in pre-pandemic 2019 and slightly below the level in last year’s third quarter.

“A too large proportion of our capacity is tied up lying waiting outside the ports,” Skou said.

Maersk, which handles one in five containers shipped worldwide, said its main ocean business is now expected to grow more slowly than global container demand. The company now expects demand to grow by 7-9% this year, up from previous guidance of 6-8%.

Container demand growth is then expected to slow to 2-4% next year, it said, reflecting normalisation of the burgeoning consumer demand for material goods during the pandemic.

Maersk shares, which have gained 40% this year, were up almost 3% at 1148 GMT.

End-to-end solutions

Maersk also announced that it is buying freight-forwarder Senator International along with two Boeing aircraft to further the group’s diversification. read more

The group, which relies on ocean shipping for two thirds of its revenue, aims to expand its services to include more air and land-based freight, hoping to deliver door-to-door logistical solutions to clients such as Walmart (WMT.N) and Puma (PUMG.DE).

Strong financial results during the pandemic have accelerated the company’s ongoing transformation from a container shipping company to an integrated logistics company.

It said that final third-quarter earnings before interest, tax, depreciation and amortisation (EBITDA) tripled to $6.9 billion compared with a preliminary figure of close to $7 billion issued on Sept. 16 when the company also raised its 2021 forecasts.

Maersk also said it would extend its share buyback programme by an additional $5 billion over 2024 and 2025.

Maersk takes flight

Maersk is turning to aviation as global supply chain congestion continues to disrupt international trade.
The company said Tuesday that it’s buying Senator International, a global freight forwarder based in Hamburg, Germany, giving it access to more planes, railway capacity, warehousing, distribution and packaging across the Americas, Asia, Europe and South Africa.
“By strengthening our footprint within air freight, we become a sizable player able to add even more flexibility to our customers’ supply chains and further support their needs for truly integrated logistics across ocean, air and landside,” it said in the company’s quarterly report.
The German auto industry is a key customer of Senator, and carmakers including Volkswagen and BMW have been hit by a global shortage of computer chips.
Maersk is further bolstering its aviation assets by leasing three cargo planes and buying two Boeing 777 aircraft.

Profits were up nearly five times

The surging cost of shipping propelled Maersk’s profit before taxes and interest to $5.9 billion and sales to $16.6 billion in the third quarter, the Danish company announced Tuesday.
That’s the best performance for both sales and earnings since Maersk was founded in 1904.
Profits were up nearly five times over the previous year as surging freight rates more than offset higher costs.
The cost of shipping has increased dramatically over the past year due to a surge in consumer demand for goods and disruption to global supply chains.

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Source: CNN & Reuters