What's going on?
Maersk reported better-than-expected quarterly results late last week, with the Danish giant’s cargo ships popping up almost everywhere you look.
What does this mean?
Demand for just about everything has been surging as economies bounce back from the pandemic, but your made-in-China iPhone doesn’t magically fly into your local Apple store: booming demand for goods means booming demand for international transport. That’s caused shipping costs to skyrocket, with one widely watched indicator of freight rates up fourfold in just a year. It’s also caused Maersk to click its heels together with glee: container shipping makes up three-quarters of the company’s revenue, which led the company to report a better-than-expected 60% jump in sales last quarter compared to the same period last year. It was also just what the company needed to raise its 2021 profit forecast by almost 50%.
Why should I care?
For markets: Looks good for the economy.
Maersk also upped its previous forecasts and said it’s now expecting global container demand to grow as much as 8% in 2021, primarily thanks to higher expected export volumes from China to the US. That should help reassure investors who are feeling anxious about the global economy: the firm handles a fifth of containers shipped globally, which makes it a bellwether stock for global trade and broader economic activity. So if Maersk is doing well, it’s a good sign for everyone else.
Zooming in: There are plenty more fish on the land.
Maersk had one other update to share with investors on Friday: the company announced that it had spent around $1 billion buying two parcel shipping companies, and hinted there would be more acquisitions to come. It’s all part of Maersk’s grand plan to diversify away from maritime shipping and expand into land-based deliveries, meaning it can now ship goods from factory to shop floor.