Maersk Executive Warns of Looming Recession

If the U.S. Federal Reserve announces later on Wednesday it is going to slowdown the pace of future rate hikes, please don’t think this means policymakers believe they have corralled soaring inflation. Instead, think of it as a sign that officials fear they are sending the U.S. economy into recession if they continue to raise rates at the torrid 75-basis point pace.

And as the old adage says, “As the U.S. economy goes, so goes the global economy.”

We’ve been seeing for months warnings of recession from various captains of industry including Elon Musk, Jaime Dimon and Jeff Bezos as well as alerts from global watchdogs such as the World Bank and the World Trade Organization.

Now it’s time to heed the advice of a company at the heart of the global economy, shipping giant Maersk. The Copenhagen-based company, one of the world’s biggest container shippers with a market share of around 17%, is often seen as a barometer of global trade.

Maersk Issues Warning as Slowing Demand Points to Looming Recession

After reporting earnings before interest, taxes, depreciation and amortization (EBITDA) of $10.9 billion for the quarter, above consensus analyst projections of $9.8 billion and up around 60% from the same period a year ago, CEO Soren Skou warned of a coming recession.

Skou said the “exceptional results” this year were driven by a continued rise in ocean freight rates, but said it was clear that they have peaked and will begin to normalize in the fourth quarter amid falling demand and an easing of supply chain congestion. Skou also flagged that earnings in Maersk’s ocean operations will come down in the coming months.

‘Dark Clouds on Horizon’

“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,” Skou said in a statement Wednesday.

“This weighs on consumer purchasing power which in turn impacts global transportation and logistics demand. While we expect a slow-down of the global economy to lead to a softer market in Ocean, we will continue to pursue the growth opportunities within our Logistics business.”

The company also said Wednesday that global container demand is expected to contract between 2% and 4% in 2022, down from a previous projection of +1% to -1%, noting that freight and charter rates declined in the third quarter as demand moderated and Chinese COVID-19 restrictions diminished.