In this and a subsequent Supply Chain Matters blog updates, we highlight some key takeaways of latest financial performance from two industry bell weather firms.


A.P. Moeller-Maersk, parent of ocean container Maersk Lines reported third-quarter financial performance late last week. Total Revenues reportedly decreased by 0.9 percent to $10.1 billion. Operational EBITDA from all businesses amounted to $1.6 billion, from the $1.1 billion reported in the prior year’s quarter, an increase of 14 percent. Net profit in the quarter was $520 million, up from $396 million reported in the earlier quarter. Global trade

In the Maersk Line Ocean segment, total revenues were $7.3 billion, fueled by a 2.1 percent growth in volume offset by a decrease in the average loaded freight rate of 3.6 percent. The shipping line further benefitted by a decrease in bunker fuel costs and overall consumption during the quarter. Ocean shipping revenues for the quarter were essentially flat year-over-year. Operational EBITDA profit for the Ocean segment was reported to be $1.26 billion, an increase of 12.6 percent.

The global shipping leader warned that growth in ocean container volumes is slowing more than originally forecasted:

Global container trade growth softened in Q3 2019 to around 1.5%. The slowdown is in line with our revised expected full-year growth of 1-2% in 2019 and reflects the broad- based weakening of the economic environment in all the main economies. Negative effects from escalating trade restrictions also weighed on trade growth.


Strategic Initiative

As we previously highlighted for readers, a key Maersk strategic initiative is to grow services and revenues by becoming an integrator of container logistics and container last-mile delivery needs. To that end, the shipping firm has identified four key metrics as a means of overall progress. Two of those metrics of note are:

Non-Ocean Revenue Growth- reported as 3.7 percent in the latest quarter, below the  6.3 percent reported for full-year 2018.

Logistics & Service, Gross Profit Growth– reported as 13.4 percent in the latest quarter, considerably ahead of the 7.9 percent reported for full-year 2018.


Industry Outlook

Regarding expectations for the upcoming year, the Q3-2019 financial performance report indicated the following:

In 2020, global container demand is projected to grow by 1-3% versus 1-2% in 2019. The continued weakening of global sentiment, above all in the manufacturing sector, reduces the likelihood of a growth pick-up in 2020. Aside from the cyclical slowing of the global economy, the main risks to global container demand relates to the US-China trade negotiations. Other risks to the outlook relate to the effectiveness of fiscal and monetary stimuli in major economies, such as the US and China. Finally, the outcome of the Brexit negotiations poses a risk to UK and European container trade.

The above sentiment from the ocean container industry leader is a likely optimistic, and from our lens, the 1-2 percent growth rate is a likely scenario of what multi-industry supply chain teams should factor in ocean shipping operating assumptions for the coming year. How this will translate to 2020 freight rates remains challenging since thus far, 2019 actual freight rates are tracking below that of 2018 levels.

Overall global shipping capacity chasing declining shipping volumes will remain the influencing factor, along with the need for added expenses in converting the existing fleet to burn cleaner, low-sulfur fuel.   From the shipper side, movements towards alternative sourcing of production to areas such as India, Vietnam and other Asian countries could move beyond existing alliance weekly network shipping schedules, which is a further consideration for 2020 shipping rates.



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