Maersk perceives smoother sailing ahead

Early this morning (Danish time) A.P. Moller-Maersk, the global shipping giant, released its annual report and 2021 fourth quarter flash summary. Most of the headlines (more and more) point to supply chains “easing” and even normalizing over the course of 2022.

Here are excerpts from page 15 of the annual report, starting with a retrospective on the 2021 market:

Consumer demand for goods was supported by economic policy and the ability to make purchases online, while services demand such as tourism and restaurants remained subdued in the first half of the year. At the same time, the supply side of the logistics industry continued to be disrupted by COVID-19 and capacity shortages, where container availability and air capacity remained tight, and wait times for vessels outside of ports remained lengthy given the bottlenecks in landside transportation and warehousing. Strong demand combined with supply shortages led to sharp increases in cost of logistics services…

That summary of the past year’s outcomes contrasts with a much less confident anticipation of the year ahead:

Going forward, the global growth outlook remains strong for 2022, led by expectations of robust business investments, strong demand, rising wages and relatively cheap capital. Moreover, inventory replenishment will support goods trade well into 2022, and the channel shift to e-commerce is likely to persist. But risks to the outlook are increasing, most clearly for China and Brazil, and with headwinds building for the USA and European consumer. It is highly uncertain if goods consumption will continue to drive up container demand. In the USA, consensus forecasters project fairly flat consumption profiles from current high levels. Purchasing Managers Index (PMI) is also softening in key countries, and the fiscal impulse will start to turn negative in 2022 in many economies. Finally, households’ appetite for services, such as travelling, could begin to take up a larger share of the wallet than usual if the pandemic dissipates during 2022, and the degree of e-commerce penetration remains to be seen.

If goods consumption declines — either from overall diminished consumption or due to a shift in proportional demand for services — then supply chain congestion should dissipate (disappear?). Maersk expects demand to be more evenly distributed across time and product lines by the second half of 2022.

And, of course, risks persist.