Shipping giant AP Moller Maersk gained $1.5bn due to higher freight rates as a result of increased demand and supply chain bottlenecks.
In an “exceptional situation”, where shipping capacity dipped in early 2020 due to lowered demand from Covid impacts and returned in a sudden surge in the third quarter of 2020, the shipping firm had record profits.
Søren Skou, CEO of Maersk, said its logistics business benefited from an upswing in demand as firms needed to boost supply chain resilience, including ocean and air transportation, port services, warehousing, customs services and logistics.
Shipping rates increased by up to 300% at the end of 2020 across the industry, with firms paying $6,000-$8,000 per container, following an influx of cargo demand due to Brexit and Covid.
“Maersk expects the current exceptional situation with the demand surge leading to bottlenecks in the supply chain and equipment shortage, which contributed by approximately $1.5bn to earnings before interest and tax in 2020, to continue in the first quarter of 2021 and normalise thereafter,” the company said in its annual report.
Logistics and services revenue grew to almost $7bn in 2020, compared to $6.3bn in 2019, and increased its year-on-year earnings by 110% to $238m, with improvements in container transport, air freight forwarding and warehousing and distribution. Ocean freight contributed a further £2.1bn.
Skou told the CNBC: “We are trying to deal with a surge in demand which is completely unprecedented, both because the consumers are spending and a large restocking started as large retailers actually stopped buying stuff in Asia in the second quarter of 2020 and well into the summer.”
He warned the resurgence in demand “has caused a significant bottleneck in terms of lack of capacity and lack of containers, which have driven freight rates higher”.
Going into 2021, while there is a “high level of uncertainty” due to Covid and changing global demand patterns, ocean freight is expected to grow by 3.5%.
☛ Want to stay up to date with the news? Sign up to our daily bulletin.