What's going on?
Danish shipping leviathan Maersk foundered on Thursday as its stock sank 10%. Sea freight makes the world go round – 2 billion tonnes sail annually, including your favorite threads…
What does this mean?
Maersk’s annual results were actually ahead of forecasts. But its fortunes lie in moving cargo internationally and a slowdown in Chinese, European and American manufacturing (meaning fewer items to ship) won’t help its 2019. Tariffs in the US-China trade war could rise next month and take their toll on demand. Maersk estimates the trade warriors could wreck 1% of industry growth this year – an albatross about the neck given 2019’s 4% forecast, according to FactSet.
Why should I care?
The bigger picture: Beware the tides of March.
Maersk is taking on water as the US-China trade war simmers. But investors still hope to sail the Pacific without irony – both sides were reported to be close with draft agreements penciled. But the American deadline looms with tremendous tariffs slated for March 1st. Brexit negotiations between the UK and European Union are said to be progressing towards the big date, March 29th. Maersk and investors alike are wary of falling afoul of ever more uncertainty in global trade.
For markets: Conglomerate begone.
Maersk had trouble flogging its $1.4 billion-annual revenue oil and gas drilling business in 2018. Now it intends to cleave off the segment and list its shares on the Danish stock market as an independent company in April. With Maersk investors set to receive shares in the new firm, those who came aboard for the drilling can double-down on their investment and leave a more focused core freight business to those who’ll brave the tempest…