Sinking Ship

Maersk reported earnings

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What's going on?

Danish shipping giant Maersk delivered mixed first-quarter earnings on Friday – but with trade war concerns continuing to cause seasickness, investors bashed its stock down 3%.

What does this mean?

Sales at Maersk, the world’s largest container shipping firm, set sail last quarter – growing 3% compared to a year before. And higher freight rates, combined with a steady hand on the cost-control tiller and currency tailwinds, helped the company deliver 33% profit growth. Nevertheless, analysts had been expecting more.

Despite Maersk maintaining it’s still on course to hit 2019 targets, stormy trade war waters loom on the horizon. The company already expects to transport even fewer containers this year than it did in February – and without a US-China trade deal, shipping volume growth could dip below 1%.

Why should I care?

For markets: Investors contain their excitement.

Container shipping acts as a bellwether for global trade – and tit-for-tat trade wars are tugging Maersk through murky waters. Lower expectations for shipment growth are a sign that current tariffs are taking their toll, further snarling up the sheets for an industry where growth rates have halved since 2008. And with more US trade taxes en route, this time targeting hitherto unscathed apparel makers, things could get even worse. American sportswear retailer Foot Locker scaled back its own growth forecasts on Friday – and its shares sneaked down 16%.

The bigger picture: Ships are having to scrub the decks.

Maersk’s recent spinoff of its oil and gas drilling arm may be a sign of greener aspirations. But much of the money it made from the sale will be spent on complying with new sulfur regulations due to drop next year, which will force ships to either switch to cleaner fuel (like liquefied natural gas) or install sulfur-busting scrubbers. Given that 90% of global trade goes by sea and the 15 largest ships create more pollution than all of the world’s cars, the likes of Maersk face embarking on a costly refurbishment program (tweet this).

Originally posted as part of the Finimize daily email.

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