Christmas shipments rush risks deepening supply chain crisis, warns Maersk boss

A sudden rush to order shipments for the festive period risks deepening delays and congestion across the global supply chain, the chief executive of the world’s second-largest container shipping group has warned.

Vincent Clerc, head of AP Møller-Maersk, told the Financial Times that, after “an almost vertical” increase in shipping costs in the past month amid worsening congestion at ports in Asia and the Middle East, more customers could try to ship goods much earlier than normal.

“At this stage the thing that can really make things worse for the global supply chain is this rush for the door where everybody starts to order more than they need. You get this bullwhip effect,” he added.

Clerc warned that any move by retailers to get their goods earlier would be counter-productive. “In order to prevent delays, you have more delays.”

But he added that there was “some element” of it taking place already with customers shipping goods that “you would put on the shelves towards the second part of the year. This is not like summer patio furniture.”

Spot freight rates have jumped by two-thirds over the past month as the shipping crisis caused by Houthi rebels in Yemen attacking container vessels has led to delays for customers and congestion in Asian and Middle Eastern ports. That led to the Danish group increasing its full-year financial guidance for the second time since the start of May.

The update from Maersk is the latest sign of how drastically the Houthi attacks in the Red Sea have upended global supply chains and changed the outlook for large shipowners, who until recently were expecting to struggle with an oversupply of ships as a weak global economy damped trade.

The development has reawakened memories of the Covid-19 pandemic, when an unexpected surge in online shopping and reduced staffing on ships drove the cost of shipping to unprecedented levels, boosting shipowners’ profits but contributing to the inflation that has since hit businesses and consumers globally.

To avoid the attacks that the Houthis claim are in support of Gaza’s Palestinians during Israel’s war with Hamas, nearly all container shipping groups have stopped sending goods between Asia and Europe via the Red Sea. The new route around Africa adds significant time and cost to journeys.

With these delays rippling across the complex networks that make up the global supply chain, Clerc warned that the knock-on effects of the attacks, which began in November, were exacerbating congestion in vital ports across Asia.

“The new element, what has been pushing this, is that you have missing capacity. We’re starting to see congestion in different hubs in Asia. You don’t only have too few ships but ships that are waiting outside ports, and that inflames a situation that was already tense to begin with.”

Asked if the current disruption could become as big as that experienced after the pandemic, Clerc replied: “Three months ago, I would have said it was not possible. Now, I would say it’s possible but unlikely.”

Maersk now expects to make an operating profit of $1bn-$3bn against its prior forecast of a loss of up to $2bn. Up until the start of May, it had forecast an operating loss of as much as $5bn.

Clerc had been gloomy about how a large number of new vessels would affect the cost of shipping this year, but said these ships now might be needed to correct the supply-demand mismatch due to the Red Sea disruption.

“As things are today, we’re of the opinion [that the disruption is] likely to last the year out,” he said. He added that, whereas he previously thought 6-7 per cent extra capacity was needed, now it was more like 9-10 per cent.

Maersk’s shares, which have risen by a quarter in the past month, were flat in early afternoon trading on Tuesday.