A.P. Moller-Maersk A/S, the world's largest container line, warned Wednesday that global trade will continue to falter with volumes declining by at least a quarter in 2Q20. Maersk dashed all hope that a V-shaped recovery will be seen in the back half of the year, rather suggesting a U-shaped recovery is more plausible.
"Looking into Q2 2020, visibility remains low as a result of the COVID-19 pandemic. We continue to support our customers in keeping their supply chains running, however as global demand continues to be significantly affected, we expect volumes in Q2 to decrease across all businesses, possibly by as much as 20-25%," Soren Skou, Maersk's CEO, was quoted in a company press release.
"2020 is a challenging year, but as we proactively respond to lower demands and show progress in our transformation and financial performance, we are strongly positioned to weather the storm,” Skou said.
Maersk pulled its full-year guidance for 2020 in late March, due to the COVID-19 pandemic that has severely damaged the global economy. In an interview with Bloomberg, Skou said he's expecting "some sort of U-shaped recovery."
"Right now, we believe we are at the bottom and we will probably be here for a while," Skou said. "But in the third quarter, the fourth quarter, we should start to see some recovery."
Maersk continued to reaffirm a gloomy outlook but was able to deliver some growth in operating profit for the first quarter. Revenue increased slightly to $9.57 billion, which was better than estimates of $9.36 billion.
Shares in Maersk plunged nearly 6% in trade on Wednesday. When macro matters once more, Maersk shares tend to sell ahead of a global selloff.
Maersk's warning comes as the WTO last month indicated the pandemic will likely result in one of the worst collapses of international trade in the post–World War II economic expansion.
On Tuesday, IMF managing director Kristalina Georgieva said the current global economic outlook continues to deteriorate and has suffered the worst blow since the 1930s. The fund will publish downward revisions to its global economic forecasts next month, Georgieva said.
In mid-April, the IMF forecast a decline of 3% in global output, with emerging and developing economies contracting by 1% and advanced economies by more than 6% in 2020.
Georgieva spoke with FT on Tuesday, she said: "With the crisis still spreading, the outlook is worse than our already pessimistic projection. Without medical solutions on a global scale, for many economies a more adverse development is likely."
It could take several years or more for global GDP to recover back to 2019 levels.
Investing legend Stan Druckenmiller called the V-shaped recovery a fantasy during a webcast Tuesday.
As of late, the V-shaped narrative for the Global and or US economy continues to unravel, suggesting more of a U-shaped or even L-shaped recovery is ahead.