What's going on?
Maersk, the world’s largest container shipping firm, reported earnings on Friday that fell short of investors’ expectations – but one aspect of its weather report charted a propitious breeze for the global economy.
What does this mean?
Maersk was expected to have benefited from 2017’s pickup in global economic growth, but its revenue and profit missed investors’ expectations and its outlook for 2018 was more cautious than anticipated. The employer of Captain Phillips was beset by both a cyber attack in June and a rising oil price, which put a dent in its profit. Furthermore, demand for container shipping was surprisingly becalmed in the fourth quarter, slowing shipping rates in the ultra-competitive industry. Encouragingly, however, Maersk said it expects demand to get the wind back in its sails in 2018 – which has ramifications for the overall trade outlook.
Why should I care?
For markets: Maersk is offloading its energy business in an effort to buoy up its share price.
Maersk is yet another company that’s splitting up its conglomerate structure as it gradually sells off its energy units in order to refocus solely on transport. It’s already sold both its oil business and a unit that supports tanker operations, but is still scanning the horizon for any interest in two other energy-related business lines. Maersk aims to have buyers in place by the end of this year, and hopes that the sales will right a share price that has been wallowing along with the global shipping industry.
The bigger picture: Maersk’s outlook signals a solid global economy.
Demand for container shipping reflects the strength of both the global economy and global trade. Significantly, Maersk expects container demand to increase 3-4% in 2018 – and it flagged up a strong start to the year so far. While that’s not Titanic growth, it’s a decent trade wind that reflects a steadily growing global economy.