Shipping giant Maersk has announced mass layoffs as weak demand and falling commodity prices wreak havoc on its earnings. This development marks a stark contrast to the pandemic-fueled shipping boom, which now appears to be fading.
The well-known global shipping company revealed in its third quarter results that its revenue has almost halved to $12 billion compared to the same period last year. To deal with these difficult market conditions, Maersk has already cut around 6,500 jobs this year. However, the company’s restructuring plans do not stop there. Brace yourselves as Maersk intends to cut an additional 3,500 jobs, with the majority of these layoffs scheduled for the next eight weeks.
As a result of these combined cuts, Maersk’s workforce is expected to shrink below 100,000 employees. The company’s chief executive, Vincent Clerc, acknowledged in a statement that the industry is facing a new normal characterized by subdued demand, historically aligned prices and inflationary pressures on its cost base.
While Maersk enjoyed record profits last year, the company had been issuing warnings for months that the extraordinary rise in shipping prices experienced during the pandemic-induced lockdowns was unsustainable. As economies reopened and pent-up demand for goods was unleashed, Maersk took advantage of the situation. However, this increase has now given way to a significant decline.
According to Drewry Shipping, a London-based company, the composite cost of shipping a 40-foot container on eight major global routes is currently $1,406 per week. This represents a staggering 54% decrease compared to the same week in 2022.
In light of these challenges, Maersk has adjusted its full-year profit expectations, projecting it at the lower end of its previously set range of $9.5 billion to $11 billion.
News of these events sent shock waves through financial markets, sending Maersk shares plummeting 12.5% in early trading on Friday. By 7:41 a.m. ET, losses had deepened, with shares down 17.2%.
This dramatic turn of events serves as a stark reminder of the volatility and unpredictability of global markets. As Maersk faces the challenging economic climate, the future of the shipping industry hangs in the balance.
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