CEO Of World's Largest Shipping Company: "Global Growth Is Worse Than Official Reports"

Tyler Durden's picture

Last week we reported that, as measured by its three primary means of transportation, global trade is in nothing short of freefall: to wit - "China Container Freight At Record Low; Rail Traffic Tumbles, Trucking Slows Down." The slowdown in this most important metric of global growth (or lack thereof), one which unlike asset prices can not be manipulated by central banks through "printing" was confirmed when Maersk, the world's biggest container shipping company, reported it would cut shore-side headcount by about 4,000, a reduction of about 17%.

As reader Joe points out, they also declined to execute options for additional 19,000 TEU mega ship new-builds and a couple of smaller 3,600 TEU feeder vessels, and will postpone a decision on building some large 14,000 TEU vessels. He adds that industry analysts have been critical of Maersk’s counter-intuitive expansion over the past few years in a recessionary climate, during which the container carriage capacity that Maersk brought on line is credited with driving ocean transport rates down.

It is unclear whether Maersk was able to capture additional market share with their larger and likely more efficient mega-ships by driving less efficient operators out of business, or if the recession killed off their competitors. What is certain is that Maersk's pricing strategy merely accelerated the "deflationary" climate experienced across the globe over the past several years, as companies have rushed to cut prices in an attempt to put competitors (who have survived this far thanks to global ZIRP policies which have pushed debt to unprecedented levels around the globe) out of business.

What is also clear is that Maersk is not just making it up. In fact, according to Maersk CEO, Nils Smedegaard Andersen, the reason why companies that are reliant on global trade, such as his, are flailing is simple: global growth is substantially worse than the official numbers and forecasts. To wit: "The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting."

Quoted by Bloomberg, Andersen says that "we believe that global growth is slowing down,” he said in a phone interview. "Trade is currently significantly weaker than it normally would be under the growth forecasts we see."

Impossible, you say, the IMF would never lie or be overly optimistic in a transparent attempt to boost consumer optimism, and thus spending. Actually, it would.

As Reuters recently pointed out, "the International Monetary Fund, World Bank and Organization for Economic Cooperation and Development have not just been wrong; for years they have all been wrong in the same direction, persistently forced to revise down predictions that proved too rosy. "There's an inbuilt 'optimism bias'," said Stephen King, senior advisor to HSBC and a former economic adviser at the British treasury. "But facts have to dominate a forecast eventually."

It's worse than that, because after 7 years of screaming "recovery" nobody believes it anymore, and meanwhile for CEOs such as Andersen, the world is on the verge of a global recession.

The IMF on Oct. 6 lowered its 2015 global gross domestic product forecast to 3.1 percent from 3.3 percent previously, citing a slowdown in emerging markets driven by weak commodity prices. The Washington-based group also cut its 2016 forecast to 3.6 percent from 3.8 percent. But even the revised forecasts may be too optimistic, according to Andersen.

The punchline: "We conduct a string of our own macro-economic forecasts and we see less growth - particularly in developing nations, but perhaps also in Europe -- than other people expect in 2015,” Andersen said. Also for 2016, “we’re a little bit more pessimistic than most forecasters."

A little as in 0.2% or as in 2%, which would mean that the world GDP is currently, as we have long claimed, in a recession and not just in dollar terms.

On second thought no need to wait for the answer: as noted above, Maersk’s on Friday reported a 61 percent slump in third-quarter profit as demand for ships to transport goods across the world hardly grew from a year earlier. The low growth rates are proving particularly painful for an industry that’s already struggling with excess capacity.

Here is the damage, as we showed last Thursday in a chart of China's containerized freight index. As of the latest data point, it just hit an all time low!

 

Trade from Asia to Europe has so far suffered most as a weaker euro makes it tougher for exporters like China to stay competitive, Andersen said. Still, there are no signs yet that the global economy is heading for a slump similar to one that followed the financial crisis of 2008, he said.

Still, despite the historic collapse in profit, the Maersk CEO remains optimistic:

“We’re seeing some distortions amid this redistribution that’s taking place between commodity exporting countries and commodity importing countries,” he said. “But this shouldn’t lead to an outright crisis. At this point in time, there are no grounds for seeing that happening."

We are confident that Mr. Andersen will be the first to advice when said distortions do lead to an "outright crisis."

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DeadFred's picture

Philosophical question, if growth has a minus sign attached to it is it still growth?

dimwitted economist's picture

Global Growth Sucks Ass? No Shit?

4shzl's picture

Typical CYA ceo-manuever: it's growth's fault our P&L sucks -- got nothing to do with massive over-investment in capacity that I ordered.

 

Uh-huh -- riiiight.  (bite me, Nils.)

Scooby Dooby Doo's picture

THIS IS FIGHT CLUB! Why are you bitchez soooo limp?

Government needs you to pay taxes's picture

Negative global growth is not 'recessionary' or 'negative' or indicative of 'contraction', it is merely 'LOW'.  Sort of like lowflation and disinflation are the new terms for deflation. 

White Mountains's picture

Sorry world, this is because of me.  I got rid of my employees and am steadily reducing inventory.

A better measure might now be the World Fly Fishing Index, as more and more entrepreneurs are saying f-it and going Galt.  Expect to see more of this.

Gotta go I hear the rainbow trout are biting, and good luck parasites of the world - we are casting you off! (pun intended).

de3de8's picture

Good for you White Mountain, I envy you.

Arnold's picture

Yes, but I can only demonstrate this with winter and summer growth rings of trees.

economies, not so much (he says as he slinks away).

 

Bangin7GramRocks's picture

Anything with a minus shall from this day forward be referred to as tumors.

g speed's picture

depends on the revised version---and of course the season--

Kprime's picture

I told my wife my dick was experiencing negative growth and she said "oh hell I can't take much more of this, things are already too tight."

was she talking about the economy or our household demographic explosion???

dicksburnt's picture

57 trillion in new debt and all I got was this lousy T-shirt

the debt choke hold is upon us.

Scooby Dooby Doo's picture

Autism is nothing more than being able to communicate with entities in other dimensions. It's a gift.

DirkDiggler11's picture

His quote "Global growth is worse than it look".

No shit, you mean the US BLS and even the Chicoms govt's have been cooking the books on the economy ???? Say it ain't so.

End the Fed and hang the bankers.

Sudden Debt's picture

They just sell their ships to a new company they founded under a panama flag for 1 dollar and let the first company go bankrupt wipeing out all the shareholders.

Then they bring their "new" company on the stockmarket and raise another billion which they pocket.

And it's all legal....

These people are the biggest crooks on the planet and their words should be taken with a saltmine.

847328_3527's picture

You're hired!........................When can you start?

dicksburnt's picture

Then they bring their "new" company on the stockmarket and raise another billion which they pocket. And it's all legal.... These people are the biggest crooks on the planet and their words should be taken with a saltmine.

 

...and to think the poor folks who are 'investing' in the 'market' for their retirement are sleeping so soundly at night.  The 401k is their last bastion of wealth (soon to be 'appropriated')

MrSteve's picture

Are you sure, it's all legal??? Well, it is one way "forward"...and... those Panama Super Ships, Panamax, etc. well, it all just to seems to happen.

I don't think "these people" are big crooks, they are just adapting to the environment. They are just ship operators trying to survive.

Berspankme's picture

not to worry Obammy gonna get dose infrastutures goin reel soon by secutive orders. he da man

nnnnnn's picture

i like how they call it global growht even its declining

Make_Mine_A_Double's picture

Only one reason to build those Triple Eagles and that - was - China trade. You fucked up and drank the Goldman Kool Aid. Yeah, I saw them too. Global growth for 10-15% far as the eye could see.

Truth is we hit peak consumption about 2007-8. All down hill now. In the past Maersk could always cross subsidize container trade with Maersk Oil. That's not working now at 50/br.

So next up will be back to the merger wheeze with CMA or MSC to play hide the salami with the 'markets'.

My question is just what kind of leverage is Maersk at. They play the long game, but I'm guessing they are levered up to the eyeballs.

 

 

Four chan's picture

he should ship the european invaders back to their failed nation states so they can fix them rather than run.

ebworthen's picture

Shipping Container Default Swaps?

silverer's picture

Fill up the ships with carbon credits.

Arnold's picture

Fresh Chinese water for Cali.

Ship Mexicans back, who will do the Jobs that the Chinks won't.

 

Win, win, win. I shoulda been  a CEO.

Government needs you to pay taxes's picture

Coal dust from China, Corium from Fuckushima, depleted uranium from the US bomb gardens blooming in the Middle East.

divingengineer's picture

I cash in the credits for real carbon.

Winston Churchill's picture

The containers themselves are also financialized.Owned by outsde investors in

pools and tranches, and leased back to the shippers,railways etc.A huge business.

CDS on those leases.A very toxic financial time bomb all by itself.

g speed's picture

don't forget the docks and the cranes--and the warehouses---

silverer's picture

He needs to watch CNBC more often.  At least he can pretend it's better.

UncleSparky's picture

He was on CNBC Europe about 2 weeks ago saying everything was roses. small roses mind you.

I shit you not.

foodstampbarry's picture

Yeah, because everybody is a broke dick. Welcome to the shit show, pal.

divingengineer's picture

Yes, welcome to the shithouse. We saved you a low flush, Comfort Height seat.

SillySalesmanQuestion's picture

You fucked up Mr. Anderson, you trusted them.

Rip van Wrinkle's picture

"There's an inbuilt 'optimism bias'," said Stephen King, senior advisor to HSBC

 

Or would you say 'inbuilt bullshit'?

Cthonic's picture

 'growing slower', 'negative growth', and so many other euphemisms: just spit it out already and call it what it is ~ contraction!

DipshitMiddleClassWhiteKid's picture

This is the reason why the elite 1%'ers have anti-air craft missiles on their yachts and getaway submarines

 

they know shits gonna hit the fan

 

 

buzzsaw99's picture

just write n/a the same way they display the p/e of the other corporations that lose money. negative infinity, less than zero, #DIV/0!. the word is not growth, it's called shrinkage bitchez.

There will be growth in the spring. [/Chance the Gardener]

Fat chance, Chance.

HoserF16's picture

For a CEO, you're very Astute.

yogibear's picture

It has to get real bad. To the point where they can no longer lie and give the false perception of a recovery.

bunnyswanson's picture

No, the orders are to follow the script regardless of events that clearly show contradictions.  Element of surprise, bitchez.  Who wants to go on a cruise to Spain, Italy, the Netherlands perhaps? Manhattan is now on the other side of the Pacific but the slaves will not know the difference!

https://www.youtube.com/watch?v=2r_84fnKQco  Ghost Cities waiting for inhabitants (notice no cafe/clubs, stadiums, theatres).

Ship departures

http://www.joc.com/port-news/us-ports/port-los-angeles/la-reviewing-envi...

Ships are awaiting at every port where the http://www.zerohedge.com/news/2015-02-23/biggest-problem-facing-world-to... the slaves will embark.

One child policy has left a lack of workers in China.  The policy has also produced Little Emperors and Princesses who "get frustrated at their job and quit after a day."

https://www.youtube.com/watch?v=bzlzlPjseao  Factory Town (Largest factory in the world)

There are deadlines to meet.

Race_Bannon's picture

We contracted some folks

JackieG's picture

Has anyone seen the BDI lately?

You can rent a 79,000 DWT ship for the same price of 3 Kenworths with trailers.

roddy6667's picture

"Global Growth Is Worse Than Official Reports" So it's growing, not just as fast as we want? This is a crisis?

jonjon831983's picture

Have you seen those ads to "invest in containers"?  Apparently, you can get a pretty high rate of return.

hedgiex's picture

LOL, You mean another zombie crying for blood infusion from the money printers. You mean only one religion i.e debt propeled growth is the answer for humankind.