A.P. Moller-Maersk, the top shipping company of the world, has issued a warning about a greater decrease in worldwide demand for sea freight containers this year, brought on by sluggish economic development and customers cutting back on stocks.

One of the largest container shippers in the world with a market share of about 17%, the company predicted a 4% decline in container volumes. Prior to that, it predicted a decrease of no more than 2.5%.

Maersk is regarded as a gauge for the state of the global economy and the health of its business because it carries goods for merchants and consumer corporations like Walmart, Nike, and Unilever.

CEO Vincent Clerc stated that he didn’t see any indications that the destocking, which has slowed down international trade, will cease this year.

“We had expected customers to draw down inventories around the middle of the year, but so far we see no signs of that happening. It may happen at the beginning of next year,” Clerc said at a media briefing.

“Consequently, the uptick in volumes we had expected in the second half of the year has not occurred,” he said.

He anticipated that the U.S. will have a slower inventory decrease than other countries.

Due to high freight rates brought on by rising consumer demand and pandemic-related traffic delays at ports, Maersk reported record earnings last year. However, a global economic slowdown this year has caused a decline in freight prices.

A flood of hundreds of new container vessels that were ordered during the pandemic have started to enter the market this year, which will only make matters worse for the industry.

“Most of the orders are still in the shipyard, so we have a long haul in front of us,” said Clerc.

He claimed that because of the industry’s strict handling of the extra capacity, there hasn’t yet been a significant drop in freight prices.

“Whether that will continue, only time will tell,” he said. “We will need to adapt to the new market situation over the next 18 months.”

The company reported that while average freight charges decreased by half, the number of containers it put onto ships between April and June decreased by 6% from a year earlier.

Maersk reduced its annual profit prediction on Friday while reporting second-quarter earnings that declined somewhat less than anticipated.

EBITDA decreased to $2.91 billion in the quarter from $10.3 billion a year earlier, above analysts’ forecasts of $2.41 billion according to a Refinitiv poll. 40% less money was made, or $13.0 billion.

In contrast to earlier projections of between $8 billion and $11 billion, it now anticipates underlying EBITDA of between $9.5 billion and $11 billion.

(Adapted from MarineLink.com)