Maersk to cut at least 10,000 jobs as shipping boom ends

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AP Møller-Maersk plans to axe at least 10,000 jobs as the container shipping industry’s pandemic-driven boom gives way to weaker demand during the economic downturn.

The owner of the industry’s second-largest fleet said on Friday it was stepping up cost cuts as the global cost of living crisis hits harder.

Container shipping lines had already warned this year would be much tougher, but the outlook has deteriorated.

Maersk chief executive Vincent Clerc warned that shipping costs would remain under pressure for the next two years, adding the Danish group had been forced to make significant job cuts, including in its logistics business despite ambitions to expand its presence on land and across the supply chain.

The redundancies are the latest sign of how dramatically a downturn in consumer spending has reversed the fortunes of container shipping companies, whose performance is seen as a bellwether for global trade. These businesses generated record profits during Covid-19 lockdowns, when increased spending on online shopping and supply constraints caused by port congestion helped drive up the cost of shipping.

But shipping rates have cratered this year, just as the recent boom in earnings draws deeper regulatory scrutiny and heavily polluting shipowners face pressure to invest in decarbonisation. Analysts say the industry’s downturn in profits has also been self-inflicted, with profligate spending on new ships during the pandemic leading to an oversupply of vessels.

Maersk said profits before tax plunged 94 per cent year on year to $691mn during the three months to September, although earnings remained above pre-pandemic levels. It warned that “a slowing global economy [and] a long list of geopolitical tensions, ranging from tense China-US relations, war in Ukraine and in the Middle East, [could] wipe out the improvements expected” next year.

The company said it would cut its workforce to below 100,000, from 110,000 in January, a move that would generate annual savings of $600mn.

Clerc said that, as part of the staff reduction, Maersk had already let 6,500 workers go, with “all offices” globally affected by its cost-cutting measures.

“We had to hire a lot of colleagues during the pandemic [but now] you don’t need the same workforce,” he added. “We don’t necessarily think this is over yet and therefore we’re taking pretty radical measures to ensure we’re in the best possible shape to go through whatever is going to happen.”

Maersk has ordered substantially less ships than rivals such as industry leader Mediterranean Shipping Company, as it funnelled its earnings into warehousing, planes and broader logistics services. But Clerc warned that the large number of ships entering the market “could put prices in shipping under pressure for a couple years to come”, damping Maersk’s ambitions to expand its dominance across the supply chain.

He said Maersk had been forced to make “a fair share” of job cuts in its logistics unit, which the group had hoped would be more resistant to economic downturns. Maersk warned that capital expenditure across the business would be lower this year and next, with its share buyback programme for next year also under review.

Profits are falling just as officials are tightening their scrutiny of shipping, which has previously proven difficult to regulate because of its international nature. Last year, US President Joe Biden promised to crack down on the “nine foreign-owned” businesses that dominate container shipping, with the country’s shipping regulator accelerating a clampdown on the sector.

Separately, the EU last month axed the shipping industry’s exemption from competition laws, which it said no longer appeared “fit for its purpose” after years of consolidation and higher profits.

Meanwhile, UN member states this summer set a target for shipping to cut its dependence on fossil fuels and achieve net zero emissions “around 2050”. In September, Maersk expanded into the energy business and launched a company to produce green methanol fuel, as it responds to pressure to decarbonise.