The shipping giant AP Moller-Maersk is reducing its workforce due to a sharp decline in freight rates and demand, with a reported 92% drop in profits in the recent quarter.
The global pandemic initially caused a surge in shipping costs due to increased demand and logistical challenges, but the situation has since reversed. High inflation and rising interest rates have now curtailed consumer spending, leading to dampened demand for shipping services.
Maersk's CEO, Vincent Clerc, commented on the industry's new challenges, citing subdued demand and inflationary pressures. The company plans to cut 3,500 jobs, following an earlier reduction of 6,500 roles, as part of cost-saving measures. These cuts are expected to save the company around £600 million in the next year.
Russ Mould, investment director at AJ Bell, suggests that Maersk's performance is indicative of a slowing global economy.
The shipping industry is currently grappling with overcapacity, which benefits customers due to lower freight costs but is detrimental to shipping companies.
Following the announcement of the job cuts and financial results, Maersk's shares fell by 11.1%. The company has maintained its revenue and profit forecasts but expects them to be at the lower end of previous estimates.
Additionally, Maersk warned of the potential impact of a slowing global economy and geopolitical tensions on its performance in the coming months.