As the industry leader, Maersk warned that it was facing conditions much worse than 2008 financial crisis since its large net loss and global trade growth ground to a half last year. Although China decided to devalue its currency which is good to Maersk’s business. Due to the low oil price and the global economic slowdown, Maersk still cuts its global trade growth forecast for 2016.
Nils Andersen told the Financial Times: “It is worse than in 2008. The oil price is as low as its lowest point in 2008-09 and has stayed there for a long time and doesn’t look like going up soon. Freight rates are lower. The external conditions are much worse.”
During these years, Maersk decided its operation strategy according to 3 factors-the global economic uncertainty, the persistence of low oil prices and the weak state of the container shipping industry. Depend on these elements, Maersk had made a lot of unusual changes.
Now, it expects global container demand, a representative for global trade growth, to increase only 2%-4%, instead of 3%-5%.
Last year, the average price of a barrel of imported crude oil declined to $36.60 in December from $82.92 a year earlier. Although in the short term, the major oil importing countries would benefit from such oil prices slump and achieve short-term economic growth, in the long run, the international oil price is plunging a negative impact on the international trade. According to Stephen King, HSBS’s senior economic advisor, lower oil price actually is a symbol of weakness in global demand. Since the global economic slowdown these years, demand for goods and services declined generally. When the commodities supply surplus, demand side pressure hurts prices further. “If it’s a situation that the global demand becomes weaker, you would get lower oil prices as well as a much weaker low trade growth.”
Another significant factor is China’s economy. Last summer, when China’s stock market fluctuated continuously, it was a warning of an economic slowdown. Because China has become the world’s second-largest economy, it becomes indispensable for the global trade. In 2000, China constituted only 3 percent of the world trade. However, only 14 years later, this number has become 10 percent. In 2013, China even became a lead trading nation. Therefore, when China is experiencing a decreased demand for imports, which had fallen 14.6%, its impact on trade is strong.
Thirdly, the state of container industry also results in a lower forecast for global trade growth. As shipping line often more exposed to worldwide demand, its problem could reflect world economic conditions. The port of Singapore, for example, was down 8.7 percent in 2015. Moreover, one problem is in the market many shipping lines are over-optimistic about future demands. Although there are already some signs of weakness in demand, they still buy new ships. Such kind of optimism for the future business also block the growth of global trade. Argued as Mr. Anderson, Maersk’s chief executive, “It’s a matter of us and everybody else misreading the market and being too optimistic, because shipping lines would take out capacity over time as it is just too expensive to operate with so much capacity”.
For the reasons above, Maersk cuts its global trade growth forecast for 2016 since current worldwide economy is facing a lot of challenges. However, as a resilient company, Mr. Anderson is still confident in Maersk’s business. “We are very strongly placed not only to get through this period but benefit from it. We are quite enthusiastic about it,” he said, adding that the company would invest in growth and customers to “thereby steal a few steps on the competition”.