A.P. Moller-Maersk, the shipping giant warned that there might be a sharp reduction in the demand for container ships in the next few months citing that the Covid-19 is going to have a profound impact on trade and commerce globally.
The company also suggested everyone be aware of what they can do in this situation to turn around their business. A.P. Moller-Maersk said that they are expecting a decrease in demand significantly specifically in the 2nd quarter and it can be as low as between 20% and 25%. But they are also trying to match the loss on the basis of one-on-one with the decline in terms of capacity.
CEO Soren Skou said that this will help the company to continue serving its consumers as well as take out the unnecessary costs to keep their pricing stable. A.P. Moller-Maersk, the largest company for container ships in the world also mentioned that it is expecting that 2020 will be a challenging year for them because the demand is likely to reduce beyond their imagination.
It will decline in all kinds of businesses in the second quarter of the year. In order to make an effort to counterbalance the slowdown seen in global trading, the company canceled over 90 sailings or 3.5% of the total capacity of shipping during the first three months in 2020. It is expected that the shipping company will have to cancel near about 140 sailings in quarter two to balance trade across the world. Their yacht charter business based in Lefkas is also expected to be affected.
The largest company for container ships mentioned that the combination of the decrease in the demand and increase in the uncertainty of the future of the business due to the pandemic situation has led them to suspend or so-called blank sailings in quarter one. A blank sailing is a kind of sailing that the carrier has canceled. Its idle fleet was made up of about 9.4% of its total shipping capacity at the end of quarter one. That is the highest level of fleet capacity that has been idled for the firm in the last 10 years.
When asked whether the fleet capacity is going to increase or not, Soren Skou replied that if the company witnesses further drop in the demand for container ships, the fleet capacity is likely to increase because they are adjusting the size of the network for ensuring that the company continues to utilize more and take out more costs that is possible for them.
A.P. Moller-Maersk reported $9.57 billion as their revenue for the first quarter this year and it was according to the expectations that the analysts made. In 2019, their revenue for first-quarter was $9.54 billion. Meanwhile, tax, depreciation, earnings before taxation, and amortization increased by almost 23% reaching $1.52 billion during the first three months of 2020 which was slightly above the guidance that the shipping company had provided in March. There has been a massive drop in the shares for the largest company for container ships in this tear. The shares fell by approximately 6% when the market opened in the morning.