The CEO of Maersk, a shipping giant seen as a barometer of global trade, said on Wednesday he sees no signs of a U.S. economic downturn as cargo demand remains strong.
“In fact, in the last few years [the shipping container] “The container market has remained remarkably resilient against previous fears of a recession,” Vincent Clercq told CNBC’s “Squawk Box Europe” on Wednesday, adding that container demand is generally a good indicator of underlying strength in the macro economy.
U.S. inventories — goods stored awaiting delivery or processing — are “higher than at the beginning of the year, but not at levels that are worrisome or suggest a significant slowdown in the near term,” Clark said, though he noted that numbers for companies replenishing stock can be unpredictable.
“We’re also seeing purchase orders from a number of retailers and consumer brands that need to import into the U.S. in preparation for next month’s demand, which still appear to be pretty strong. At least the data and the indicators that we have seem to suggest that there is still some confidence that current levels of consumption in the U.S. will continue.”
Concerns about a recession in the world’s largest economy have soared following a series of weaker-than-expected jobs reports last week, dividing economists and market participants.
U.S. retail inventories — a measure of the accumulation of unwanted stock — rose 5.33% year over year to $793.86 billion in May, according to the latest U.S. Census Bureau figures.
A report published on Wednesday by leasing platform Container Exchange said indicators suggest inventory is outstripping demand, meaning the coming months will not be “boomy” for container traders, the logistics market and stockpiled retailers.
Maersk’s Clark said he had been surprised by how resilient container volumes have been over the past few years and that there were no signs the global economy was heading towards a recession, and he expected that to continue in the coming quarters.
He added that the global share of containers originating from or heading to China is increasing, with Chinese exports driving the growth in container volumes.
For 2022, the Danish company has significantly darkened its outlook, warning of weak demand due to inflation, the threat of a global recession, the European energy crisis and the war in Ukraine.
The combination of these factors has caused freight rates to fall in 2023 and Marsuk’s profits to plummet.
This year, rising geopolitical tensions in the Red Sea partially reversed that trend, causing shipping companies to reroute trade around the southern coast of Africa, lengthening sailing times and reducing capacity in the global system.
The Red Sea will spark further inflation
Clark told CNBC on Wednesday that he expects the diversion of Red Sea waters to continue at least until the end of the year.
“Of course, you need more shipping capacity, more ships to carry global trade around the world, and that caused a shortage in the second and third quarter that we’re currently addressing,” he said.
“That means higher costs in the short term and, as a result, we have had to bear significant costs in terms of needing more vessels and more containers to carry out the work that is expected of us.”
He added that if the situation continued, Maersk would see a “significant inflation” in its cost base that it would have to pass on to customers, raising costs of shipping from Asia to Europe or the US East Coast by 20 to 30 percent.
Clerc added that in the short term, capacity constraints have had a positive impact on the Danish shipping giant’s margins, leading to three upward profit revisions in recent months.
Maersk said on Wednesday its second-quarter underlying profit fell to $623 million from $1.346 billion a year earlier, while sales fell to $12.77 billion from $12.99 billion.
The company said that although lower on an annual basis, ocean freight margins were “significantly improved” compared to 1Q24 and 4Q23, with profit before interest and tax margins standing at 5.6% compared to -2% and -12.8% in the prior periods.
Marsak shares were down 1.6% as of 12:45pm London time on Wednesday.
