When Will Maersk’s Port Delay Chaos Halt?

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  • The chaos that has bedevilled global supply chains in recent months will extend into next year.
  • “The whole system has become one gigantic bottleneck,” Chief Executive Soren Skou told reporters on Tuesday.
  • 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 the previous guidance of 6-8%.

The instability that has plagued global supply chains in recent months will continue into next year, with a shortage of truck drivers stopping hundreds of container ships from offloading goods all around the world, according to shipping company Maersk, as reported by Reuters.

Supply chain challenges

On Tuesday, Chief Executive Soren Skou told reporters, “The entire system has become one big bottleneck.”

The largest issue stopping containers from leaving ports, according to Skou, is a labour shortage, notably among heavy goods vehicle drivers in the United States and the United Kingdom, despite “substantial” wage increases.

After Maersk announced strong third-quarter profitability on the strength of record freight prices prompted by supply chain challenges as the global economy recovers from the coronavirus crisis, Skou stated 300 container boats are idling outside ports.

Lower volumes

Maersk said it has increased capacity to meet rising demand, but this hasn’t been enough to compensate for port congestion, which drove third-quarter container volumes down 4% from pre-pandemic 2019 and slightly below last year’s third quarter.

“An excessive amount of our capacity is stranded waiting outside the ports,” Skou remarked.

Maersk, which handles one out of every five containers delivered globally, said its primary ocean business will now grow at a slower rate than global container demand.

Demand is now expected to expand by 7-9 per cent this year, up from 6-8 per cent previously forecast.

At 1148 GMT, Maersk shares, which have risen 40% this year, were up nearly 3%.

End-to-end solutions

Maersk also announced the purchase of Senator International, a freight forwarder, as well as two Boeing planes, as part of its diversification strategy.

The company, which makes two-thirds of its money from ocean shipping, wants to expand its services to encompass more air and land-based freight, to provide door-to-door logistical solutions to clients like Walmart and Puma.

The company’s continuous transformation from a container shipping company to an integrated logistics company has been expedited by strong financial success during the pandemic.

It said final third-quarter profits before interest, taxes, depreciation, and amortisation (EBITDA) tripled to $6.9 billion, up from a preliminary number of close to $7 billion released on Sept. 16 when the business also boosted its estimates for 2021.

Maersk also announced that it would increase its share repurchase programme by $5 billion in 2024 and 2025.

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Source: Reuters 

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