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China’s economic rebound is weaker than expected as consumers emerge “stunned” from pandemic-led disruptions and a real estate meltdown last year, according to the head of AP Møller-Maersk. Vincent Clerc, the new chief executive of the world’s second-largest container shipping group, said, however, that trading volumes associated with the Chinese economy remained resilient with little sign of negative impact from US-led efforts to “decouple” from China. “When we started the year, there was this hope that as China reopens after Covid we would see a really strong rebound,” Clerc said in an interview in Beijing. “I think we’ve not seen it yet . . . The Chinese consumer is a bit more stunned by what’s happened and is not in a splurging mood right now.” China has set a growth target of 5 per cent this year — its lowest in decades — after the world’s second-largest economy undershot expectations in 2022 as a result of President Xi Jinping’s strict zero-Covid strategy. Profits at Chinese industrial groups slumped 22.9 per cent in January-February, official statistics showed on Monday, further underscoring concerns about the economy’s rebound from pandemic restrictions. But many economists are hoping for a stronger performance after China abruptly abandoned its Covid-19 controls in December. The IMF is predicting growth of 5.2 per cent in China this year. Clerc said some of Maersk’s customers were drawing parallels with the outbreak of severe acute respiratory syndrome, or Sars, in 2003, when consumers in the hardest-hit areas took time to recover their confidence.

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“This is not quite the ‘roaring ’20s’-type mood that one could have expected after this long interruption,” said Clerc, who was among global chief executives gathered in Beijing at the weekend for the country’s annual China Development Forum investor conference. He said 70 per cent of Chinese savings were in real estate, which has been hit hard by a government crackdown on leverage, while Chinese stocks were also underperforming. The negative mood has been compounded by geopolitical tensions between the US and China. “It’s not like you get a lot of optimism around when you follow the news and so on, so there may be a bit of a delayed effect as people get back into their [spending] routines,” said Clerc. Maersk has gained greater exposure to China’s domestic consumer market through its $3.6bn acquisition in 2021 of Hong Kong-based LF Logistics, which has extensive logistics operations on the mainland. The Danish group is seeking to go beyond its core shipping line business into markets ranging from ecommerce to road and air freight.

According to Alphaliner’s top-30 shipping lines, there have been a large number of changes in positions 11 to 30 over the last twelve months. Specifically, the capacity changes of smaller shipping companies ranged from -34.6% for China United Lines (CULines) to +55.3% for Emirates Shipping Line.

These capacity changes had only a modest effect on the overall picture. This week’s capacity count of the world’s ten largest shipping lines shows that they account for 83.7% of the total global container fleet. Meanwhile, the combined share of shipping lines that occupy positions 11 to 30 only represent 9.4% of the global container fleet.

Medium carriers have not gained market share as their combined growth since 1 January 2022 stands at just 2.1%, which is roughly half the growth recorded by the total container fleet.

Not surprisingly, smaller shipping lines, which ventured into East-West routes when these were booming during the COVID-19 pandemic, have been hit hardest by the collapse in cargo demand from China to Europe and North America.

Chinese operator CULines recorded the largest fleet reduction year-on-year: Following the closure of its Far East – North Europe ‘AEX’ service and an agreement with Antong Holdings for the early re-delivery of a number of panamax vessels, the CULines fleet size has fallen from 87,160 TEUs at the beginning of last year to 56,960 TEUs this week (-34.6%).

CULines’ entry into East-West routes propelled it to 22nd place in early 2022, but the carrier is now 29th in this week’s Alphaliner top30.

On the other hand, Wan Hai Lines and Matson are two shipping companies that significantly expanded their capacity in the Trans-Pacific when this route was booming. Both companies had to react to the drop in cargo demand on this trade route by closing services.

Despite the delivery of its first two vessels of 13,100 TEUs, Wan Hai Lines’ current fleet is only 12,940 TEUs larger than at the beginning of 2022 (+3.1%). And, Matson’s fleet contracted 2.1% and dropped two spots out of the top-30 to 28th.

The biggest winner among midsize carriers is Pacific International Lines (PIL). Its fleet is currently almost 30,500 TEUs larger than on January 1, 2022 (+11.4%). Specifically, Emirates Shipping Line and Swire were the shipping companies with the highest percentage growth.

While Swire’s 41.9% growth is clearly linked to the acquisition of Westwood Shipping Lines, Emirates Shipping Line’s growth was organic, as the carrier expanded its intra-Asian network and began operating more ships to replace existing ones. Space agreements on the ships of the associated shipping companies.

Zhonggu Logistics (+14.5%) is another shipping company that no longer focuses solely on its main Chinese domestic services, but is expanding its intra-Asian routes. Notably, all of the top 11-30 Korean operators reduced their fleets last year.

In 2022, Ocean delivered the strongest result on record due to the high freight rates and strong demand, particularly in the first half of the year. Ocean revenue was up 33%. Throughout the year, Ocean continued to deliver on the strategic transformation, maintaining a stable level of long-term contracts. Ocean continued to improve on delivery performance over the year as congestion eased and was able to maintain strong margins due to the contractual nature of its customer relationship.

In Logistics & Services, revenue increased by 47%, with an organic contribution of 21%. The organic revenue growth came primarily from top 200 customers as the business continues to develop integrated solutions to meet end to end supply chain needs. Growth was particularly strong in warehousing where the footprint more than doubled to 7.1m sqm with the acquisition of LF Logistics alone adding 198 warehouses or 3.1m sqm.

In Terminals, EBIT adjusted for the Russia exit reached a record of USD 1.2bn, supported by solid volumes growth and high congestion related storage income. Based on a combination of tariff increases and efficiencies the impact of high global inflation has been mitigated.

Dividends

The Board of Directors proposes a dividend to the shareholders of DKK 4,300 per share of DKK 1,000 (DKK 2,500 per share of DKK 1,000 previous year). The proposed dividend payment represents a dividend yield of 27.5% (10.7% previous year) based on the Maersk B share’s closing price of DKK 15,620 as of 30 December 2022 and 37.5% of net underlying profit. Payment is expected to take place on 31 March 2023 after the Annual General Meeting.

Guidance for 2023

Guidance for 2023 is based on the expectation that inventory correction will be complete by the end of the first half leading to a more balanced demand environment. 2023 global GDP growth is expected to be muted and global ocean container market growth to be in a range of -2.5% to +0.5%. A.P. Moller-Maersk expects to grow in-line with the market.

Based on these assumptions, for the full year 2023, A.P. Moller-Maersk expects an underlying EBITDA of USD 8.0-11.0bn, an underlying EBIT of USD 2.0-5.0bn, and free cash flow (FCF) of at least USD 2.0bn. The CAPEX guidance for 2022-2023 of USD 9.0-10.0bn is maintained. For 2023-2024 the expectation for accumulated CAPEX is USD 10.0-11.0bn, led by investment in our integrator strategy, technology and decarbonisation. Without impacting the financial guidance and in conjunction with the restructuring of our brands an impairment and restructuring charge of USD 450m is expected in Q1.

The Panama Canal Authority is reporting that a fire broke out in the engine room of a containership near the Pacific entrance of the Panama Canal on Monday.

The fire was reported on the Maltese-flagged Cape Kortia as it navigated towards the PSA Panama International Terminal.

Photos posted online show smoke billowing from the ship’s funnel near the Bridge of the Americas.

Panama’s National Aeronaval Service responded to the incident with two vessels.

The fire has since been brought under control and no injuries are reported.

“The CAPE KORTIA remained briefly on its way to the Pacific Access Channel until it got removed by the Panama Canal staff,” the Panama Canal Authority said in a statement. “These maneuvers occurred during its regular transit window and did not cause delays to vessels transiting the Panama Canal.”

The 2017-built M/V Cape Kortia is owned by Costamare (NYSE: CMRE) and chartered to MSC Mediterranean Shipping Company. Its capacity is 11,010 TEUs.

The three vessel-sharing alliances have cancelled a colossal 53 Asia-Europe westbound sailings in the first seven weeks of this year.

According to an Alphaliner analysis, this represents 27% of their original scheduled capacity.

And carriers could decide to blank more sailings if demand is worse than expected after the Chinese New Year holiday, which commences on Saturday.

Ocean Alliance members CMA CGM, Cosco, OOCL and Evergreen have voided 23% of their Asia-Europe headhaul voyages scheduled for 1 January to 17 February, according to Alphaliner, with 22% of their sailings for North Europe and 25% of its Asia-Mediterranean voyages also culled.