Investment banking firm Goldman Sachs reportedly told clients that a lengthy and severe downturn is coming for the shipping industry on Monday morning.
“We believe market expectations are still too complacent on the depth and duration of the coming shipping recession,” Goldman analyst Patrick Creuset said according to a reporter who listened to their client call. He allegedly suggested traders sell stock in the Danish shipping company A.P. Moller-Maersk.
Crueset claimed he had reason to believe that freight rates and earnings must decline, as it is the only way for expensive tonnage to be phased out.
“Even after the further rate drop in recent weeks, we see no sign of this: New vessel deliveries are running at c.1 percent of the global fleet/month with very little slippage, idling and scrapping remain low, and November active capacity is set to increase significantly vs. October on the main trades,” he said.
Goldman Warns About Shipping Recession As Consumer Sputters https://t.co/RcqYJry34a
— zerohedge (@zerohedge) October 17, 2023
Maersk, the second-largest shipping company in the world, has been raising the alarm about a recession for some time now in light of COVID pandemic aftershocks. In November 2022, Maersk warned that a global recession would drive demand for containers down by 2-4 percent (despite the fact that Maersk’s earnings had exceeded analysts’ expectations that summer).
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Maersk’s then-chief executive Soren Skou at the time warned, “With the war in Ukraine, an energy crisis in Europe, high inflation, and a looming global recession there are plenty of dark clouds on the horizon. This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand.” Skou made the prediction that we would “soon be in a recession, certainly in Europe but potentially also in the US.”
In August 2023, Maersk reported a sharp decline in Q2 earnings due to plummeting container rates (again, it still managed to beat expectations). It again warned of a larger drop in global shipping demand, as companies “continued destocking particularly in North America and Europe” amid recession fears in the U.S. and Europe. It claimed that its 2022 profits were “exceptional” and not the rule. According to a year-on-year comparison, Maersk’s revenue dropped by 40 percent, from $21.65 billion in 2022 Q2 to $12.99 billion in 2023 Q2.
“The Q2 result contributed to a strong first half of the year, where we responded to sharp changes in market conditions prompted by destocking and subdued growth environment following the pandemic fueled years,” Maersk CEO Vincent Clerc said in a statement. “Our decisive actions on cost containment together with our contract portfolio cushioned some of the effects of this market normalisation. Cost focus will continue to play a central role in dealing with a subdued market outlook that we expect to continue until end year.”
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