Maersk Gives Bleak Operations Update Amid Unprecedented Supply Chain Chaos

A.P. Moller-Maersk has painted a bleak picture of global supply chains in an operations update published Friday.

The update comes as supply chains are under major stress with historic congestion and bottlenecks plaguing just about every aspect of shipping, with about 10% of containership capacity waiting at or our outside clogged ports with no sign of easing this year, according to Maersk’s CEO Soren Skou.

“There have been many challenging periods over the years, but the situation over the last 12 months is unique, in as much as it has had a global impact. All continents are seeing high volumes and operational challenges, restricting both ocean and land-side capacity at the same time,” Maersk said in its update.

“Like all carriers, Maersk has been heavily affected by COVID-19 outbreaks slowing down local operations. Regardless if it is a port, vessel or warehouse, when one becomes impacted it quickly results in a downward spiral as delays accumulate. We see pockets of improvements, only to get setbacks when our operations encounters new COVID-19 outbreaks and lockdowns,” it said.

As an example, Maersk points to the situation in Vietnam, home to a number of factories and warehouses, where COVID-19 cases are increasing and lockdowns continue.

“This has a direct impact on our ocean sailings and our ability to your export your goods. This is not because the vessels are not sailing, but even in a best-case scenario, a delay of 1-3 days in a port on a 12-port rotation often means that a roundtrip of 10 weeks can take 11 or 12 weeks,” Maersk points out.

The company said with this situation, customers not only in Asia and North America but also globally will experience a direct impact on their supply chain. In Europe, for example, there is waiting time to berth almost every large port due to labor shortage and high yard density.

“In dealing with these challenges, we have deployed more vessels and containers than prior to the pandemic, yet we still see unfortunate delays leading to missed sailings and missed capacity. We are looking to optimise all corridors in the rotation, call alternative ports and actively reposition empty containers, all with the objective of leaving as little unused capacity as possible on all legs. However, when experiencing sudden and significant spikes in demand, the situation remains testing,” Maersk said.

Maersk adds that it has been working diligently to communicate issues facing the supply chain, both negative and positive. But if Maersk has one message, it would be this:

“From a customer perspective, our advice remains: please prioritise your cargo.”

It’s not all bad news, however, at least for Maersk. A trading update from Maersk on Thursday said this “exceptional market situation” is expected to drive massive earnings for the company, with underlying EBITDA now expected in the range of $22-23 billion in 2021, it’s third such upgrade after calling for $8.5-10.5 billion in February.

Read Next: ‘Exceptional’ Container Market Leads Maersk to Upgrade Guidance… Again

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