Maersk underlines persistent supply chain issues

Maritime conglomerate Maersk has said congestion in global supply chains has persisted longer than expected.

The gloomy prognosis was made as the company raised its 2022 profit guidance this week after beating quarterly revenue expectations.

The shipping industry has seen a surge in consumer demand and pandemic-related log-jams holding up containers in key ports in China, Europe and the United States.

“Congestion in global supply chains leading to higher freight rates has continued longer than initially anticipated,” Maersk said in a statement.

It now expects underlying earnings before interest, taxation, depreciation and amortisation (EBITDA) of around $37 billion versus the $30 billion it forecast earlier. 

Maersk had initially expected full-year EBITDA at $24 billion.

The Copenhagen-based company is often seen as a bellwether for global trade as it transports goods for retail giants such as Walmart, Nike and Unilever.

Electrolux, Europe’s biggest home appliances maker, last month missed second-quarter profit expectations in part due to supply chain problems, but said the supply chain situation looked better for the third and fourth quarters.

Maersk, one of the world’s biggest container shippers with a market share of around 17%, said in June that the cost of shipping goods was unlikely to abate anytime soon due to array of inflationary pressures.  

The company’s warning follows that recently from TT  Club senior underwriter Dorota Jilli, who indicated that the global supply chain is in danger of collapse, warning that businesses need to understand the risks they fade in moving goods and supplies around the world.

Jilli said the situation shows no signs of easing as issues which in themselves would be seen as a serious risk have combined to create a perfect storm.

She said challenges inherent in today’s international trade and the supply chains that service it are painfully obvious – higher prices of energy and food, shortages of and delays in delivering manufactured goods, dynamic changes in markets and sourcing regions.

The on-going effects of the pandemic, with its associated lockdowns and the war in Ukraine are proving catalysts to ignite underlying economic and environmental trends that will continue to fuel long-term changes in the pattern of global supply and demand, Jilli explained.

“We are suffering from a disappearing ability to absorb short-term shocks to the supply chain because of fundamental societal and geopolitical changes to the global equilibrium,” explained Jilli. 

“Yes, COVID and the war are disruptive and are driving up prices but the longer-term trends of production cost increases in Asia and stricter demands of ESG mean that cheaper goods and transport services are features of a past global economy.”