Profit At World's Largest Shipping Company Plunges On Collapsing Global Trade, Sinking Crude Prices

Tyler Durden's picture

Back in November, Nils Smedegaard Andersen, CEO of Maersk, the world’s largest shipping company, gave the world a reality check when it comes to global growth and trade.

“The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting” Andersen told Bloomberg. "We believe that global growth is slowing down [and that] trade is currently significantly weaker than it normally would be under the growth forecasts we see."

That amounted to a harsh indictment of the IMF’s “built in optimism bias” (to quote HSBC), a bias which leads the Fund to perpetually revise down its estimates for global growth once it’s no longer possible to deny reality. “We conduct a string of our own macro-economic forecasts and we see less growth - particularly in developing nations, but perhaps also in Europe,” Andersen added. “Also for 2016, we’re a little bit more pessimistic than most forecasters."

His comments came on the heels of a quarter in which Maersk’s profits fell 61% Y/Y. On Wednesday, we got the latest numbers out of the shipping behemoth and the picture is most assuredly not pretty.

For 2015, profits fell a whopping 84% to $791 million from $5.02 billion in 2014. Analysts were looking for a profit of $3.7 billion. 

For Q4, the net loss came in at $2.51 billion, far worse than the Street expected. Shares of Maersk fell sharply in repsonse.

Not helping matters was Maersk's oil unit, which took a $2.5 billion impairment charge. "Given our expectation that the oil price will remain at a low level for a longer period, we have impaired the value of a number of Maersk Oil’s assets," Andersen said. The company needs $45-55 a barrel to break even. Obviously, we're a long way from that. 

The outlook for Maersk Line - the company's golden goose and the world's largest container operator - racked up $182 million in red ink last quarter and the outlook for 2016 isn't pretty either. The company now sees demand for seaborne container transportation rising a meager 1-3% for the year. "Freight rates in 2015 averaged a monthly $620 a container on the key Asia to Europe trade route, with the break even level at more than $1,000," WSJ notes. "In February the cost of moving a container from Shanghai to Rotterdam fell to $431, according to the Shanghai Containerised Index, barely covering fuel costs."

"Guidance," Citi wrote in a note this morning, "implies no respite for 2016": 

"2016 guidance for an underlying net profit significantly below 2015 (US$3.1bn) vs. US$3.4bn consensus. Maersk Line significantly below 2015 (US$1.3bn); Maersk Oil a negative underlying result (breakeven at an oil price US$45-US$55); APMT flat and lower in other divisions. Heavy CAPEX continues at c.US$7bn. We expect consensus to reflect guidance."

"Maersk Line expects an underlying result significantly below last year as a consequence of the significantly lower freight rates going into 2016 and the continued low growth with expected global demand for seaborne container transportation to increase by 1-3%," the company said in its annual report out Wednesday.

Here's a look at how swings in crude and freight rates affect the company's bottom line:

Addressing the global deflationary supply glut, the company said it's being "severely impacted by a widening supply-demand gap". "The demand for transportation of goods was significantly lower than expected, especially in the emerging markets as well as the Group’s key Europe trades, where the impact was further accelerated by de-stocking of the high inventory levels," Maersk noted. "In 2015, global economic conditions remained unpredictable and our businesses and long-term assets were significantly impacted by large short-term volatility."

Right. So as we've said on too many occasions to count, global growth and trade has simply flatlined and one look at the Baltic Dry certainly seems to suggest that there's no "recovery" anywhere on the horizon. Indeed we learned last month that in November, US freight volumes suffered their first Y/Y decline since 2012 and before that, the recession.

So once again, central bankers had better learn how to print trade or else it will be time to start "liquidating" excess inventory. And we mean "liquidating" in the most literal sense of the word...

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Latina Lover's picture

Unlike the recovery lies peddled by our mainstream media whores,  the Baltic Index cannot be fudged in the same way as our government issued statistics.

drivenZ's picture

you're kidding right? I'm not saying it is being manipulated but the shipping industry has tons of shady people. It's full of Greeks, who are notorious for fudging statisitics. Also, there's two sides to the index. supply and demand. There is over supply. There's been oversupply for 8 years now and shipping companies have had no incentive to stop building ships. It's like OPEC with oil except on a longer(time wise) scale. Asset prices are low, new build prices are low, so to the extent possible companies keep building and buying ships so they don't lose market share. There is a distinct shipping cycle. It's called the shipping "cycle" for a reason. When the cycle turns, they'll make boatloads of money. 

Momauguin Joe's picture

Except if the cycle doesn't "turn".

drivenZ's picture

It's called a cylce for a reason. It always turns. It can take many years due to the nature of the asset. It takes a few years for a ship to build which then has a life of 30 years.  

Lady Jessica's picture

What is the "cycle" nonsense of which you speak.
Central banking has put an end to all cycles. 

peddling-fiction's picture


Good point.

The merchant marine is a difficult crowd.

open-range's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

iggenFlot's picture

Are you rimming mom for that dough, or is she rimming you?

iggenFlot's picture

The Baltic Dry Index is low by any measure, but it's not all because of low demand for container ships as routinely implied here. There's also a huge surplus of recently built ships that contribute to a supply glut. However, you won't hear that discussed much here because it interferes with the Zero Hedge "the world's going to hell in a hand basket" narrative.

Anopheles's picture

That's absolutely true, there's a surplus of ships, and the price for hire goes down.   Just like the price of oil has gone down, despite an increase in consumption.  It's just that supply increased faster.    

It sure doesn't fall in line with the "spread fear, not reality" motto around here. 

And the BDI is only for bulk dry goods, like iron ore, coal, grain, cement, etc



BinAround's picture

Ufda!  So supply & demand sets prices?   Good call iggen.   

buzzsaw99's picture

Deutsche Bank is fine, and that's the only thing that really matters. /s

oklaboy's picture

Port of Houston: Monday and the morning of Tuesday there were no container ships unloading at the port, my longshoreman friends tell me, the first time ever that they can remember of that happening. And the warehouse union ( clerks and checkers) are out as far as one week, meaning there are no ships of consequence for the clerks and checkers to work, and the longshoreman to unload.  And an estimated inbound 60/1 container ratio, meaning 60 empties to one full container is coming into the port, with 55K? estimated empties sitting in the yard.

webmatex's picture

A sinking ship... called the Titanic.

Bangin7GramRocks's picture

Can't we just rumor away this bad news and add a solid 20% to the share price? Profits. Fuck all that!

jtmo3's picture

Bad news! Stawks soar!!!

TradingIsLifeBrah's picture

Who needs physical goods when you can trade stocks?

peddling-fiction's picture


All hail the algobeast... /lol

GeezerGeek's picture

Virtual reality can't go mainstream soon enough. In VR I can become incredibly wealthy and control my world.

lester1's picture

Obama said the economy was awesome. Why would he lie to us?

iinthesky's picture

Why does the "economy" have to grow grow grow and never stop growing? I mean at some poimt, population being equal, shouldn't the ecinomy just "stabelize" for a long while?

CuttingEdge's picture

Unfortunately Ponzis need to grow or they become extinct.

Lorca's Novena's picture

thats what the immigrants are for...

falak pema's picture

BLACK DWARF OF OIL PATCH now calling on all members of Fossil's "royal" famiy.

Dick Cheney eat your Halliburton heart out !

How can Potus say growth in US will be 2.6% in 2016/2017 ?

What crystal ball and Astrological compass does he use ?

doubledutch's picture

Not a crystal ball,but the koran is Barry Soetoro's inspiration.


Stormtrooper's picture

He read it off the teleprompter so it must be true.

Cloud9.5's picture

What is interesting is that it has dropped below the bottom reached in 08 when the world economy had a heart attack.

Kaeako's picture

Not that interesting because things were very different back then, but China can't pull the sledge to infinity. We're in a period of readjustment now that the Chinese economy is maturing so volatility is to be expected.

wildbad's picture

the motor just stopped..who could have seen that coming.

Geezer Oil Trader's picture

The website for Maersk's oil entity frequently refers to how "young" their people are.  That is a good thing in this case given how long it will take for oil prices to be of benefit to Maersk.

overide's picture



We've only thrown a propeller blade!

Paul John Smith's picture

It's cute how he said the world economy is "growing" at a slower pace ...

(I don't really think it is growing at all)

GeezerGeek's picture

Not growing at all can be characterized as "growing at a negative rate." That certainly sounds more optimistic to me.

Anopheles's picture

And lots of people misread that "growing slower"as shipping volume is shrinking.  In fact shipping volume is still increasing, just not very quickly.


The low prices reflect there's a surplus of ships that have been built in the last couple years, in anticipation of that increase that didn't happen. 

Just like oil prices.  Oil has plummeted but the actual amount of oil used has increased.  Oil usage increased by 2.6% in 2015 and is projected to increase by 1.6% in 2016. 

Vendetta's picture

The CEO of Maersk is peddling fiction ...

peddling-fiction's picture


Maybe he just is peddling chaos...

TheMerryPrankster's picture

peddling friction

time to oil the chains you can beleive in

_ConanTheLibertarian_'s picture

How dare he speak the truth! He should be keelhauled using his biggest ship.

shovelhead's picture

Merkel should take advantage of firesale shipping rates and pack some containers full of rapefugees back to Turkey.

Everyone wins.

Bazza McKenzie's picture

Especially if they have an unfortunate shipping accident as shown in the pic.

cashtoash's picture

If they lose money shipping other people's cargo, why do they ship it at all?  what kind of business is this?

gdogus erectus's picture

To go along with negative interest! I get it! It's bizaro-world!

Bazza McKenzie's picture

They're still making money before depreciation, and they're stuck with the depreciation whether they are carrying cargo or not.  They would be making a bigger loss if they stopped shipping, so it is a choice of the least loss-making option.

Funn3r's picture

Jeebus now that last photo  is what I call a really tragic boating accident 


CEO Anderson is an exceptional business person for calling out the God damned International Monetary Fund, and that old dried up prune hermaphrodite Christine Legarde for their shit-for-brains-stupid economic forecasts that have been completely fucking off since Bear Stearns imploded. CEO Anderson would be a better fit at the IMF than Legarde. Furthermore, Legarde is a counterproductive hack pseudo-politician, and the useless twat has seen her best-before date expire. I have called for her ouster many times in the past, but this time Anderson makes it obvious to the whole World that this useless ancient bitch hack must go.