A.P. Møller – Mærsk A/S reported a strong set of results for Q3 2022, the 16th quarter in a row the company has delivered year-on-year earnings growth. The headline numbers show Maersk’s revenue for Q3 increased to US$22.8bn, EBITDA increased to US$10.9bn and EBIT increased to US$9.5bn. Profit was US$8.9bn for Q3 and US$24.2bn for the first nine months of 2022. Return on invested capital (ROIC) was at 66.6% for the past 12 months. The full results announcement can be read here.

Another record result was widely expected, and Maersk certainly did not disappoint in this regard. But the container shipping industry has clearly hit a peak, and the bigger questions are how fast and how far volumes, freight rates and profitability will come down.

Skou said demand for ocean shipping began to decline in August “and this was clearly observed in both rates and volumes. The positive aspect of this normalisation is that the lower demand will allow global supply chains to progressively improve, even if it still remains elevated in some geographies and it will certainly also help Maersk deliver a more reliable service in Ocean, which is what we aim to do,” he said.

Maersk reaffirmed its earlier guidance for its own result for FY 2022, but pulled back its earlier forecast for global container demand. It now expects global container demand to fall by 2% to 4% in 2022. Maersk’s own carryings have fallen 7% over the first nine months of the year and its average expected full year contract rates are now “slightly lower” than what Maersk expected in August. The biggest volume declines have come on the major-east west routes, “where we experienced 10% lower volumes in Q3 compared to the third quarter in 2021,” Skou said. In later remarks he noted that carriers have responded to the drop in demand by taking out around 15% of capacity on the Pacific and Asia-Europe trades.

A 10%+ drop in volume could mean some shippers will struggle to meet minimum volume levels in contracts, and will perhaps seek to renege on commitments they made when space was tight. Commenting on the impact of falling volumes, Skou said: “I know there has been a lot of talk about customer contract behaviour, but the reality is that the vast majority of our contracts sold and our contract portfolio has performed as expected. But when the customers themselves suffer the effects of economic decline, volumes can’t be conjured out of the thin air. This is where the partnership we have with our customers counts the most, and we continue to work with them to provide additional flexibility and space to help manage the volatility in their supply chains.”

At the same time Maersk is counting on its strategy to transform itself into a global logistics company offering end-to-end products and services to insulate its own financial performance from a downturn in ocean shipping. Skou said one of the key goals of the company’s strategic transformation is to “break away from the cyclicality of the shipping industry and the commoditized nature of traditional container shipping. We remain convinced that creating closer relationship with customers and maintaining an intense focus on their needs is the way to do so. This is not a fast and easy journey, but along the way, we have not forgotten what enabled us to successfully weather the cycles in the past and today is no different. We will stay the course, and we will complete the transformation to a global logistics company offering fully integrated, differentiated and end-to-end products and services,” Skou said.