Maersk: Shipping will return to normal in the second half of the year, with heavy investment in e-commerce

Maersk released its 2021 financial results on February 9. At the same time , the company announced that it would expand its business on land by investing billions of dollars in trucking, warehousing and last-mile delivery .

Since the beginning of the pandemic , shipping prices have continued to hit record highs . Under such circumstances, Maersk's revenue increased by 55% year-on-year to US$61.8 billion in 2021, and its profit reached an unprecedented US$21 billion . But executives said this situation is about to end.

Maersk's chief executive predicts that the company's profits will remain stable in the first half of 2022. However , in the second half of the year , as the number of new crown cases decreases, workers return to work , and port congestion eases, shipping rates will "normalize ." Maersk plans to deploy e-commerce logistics business before freight rates fall .

Maersk is planning to make large investments in e-commerce logistics as e-commerce sales have surged during the pandemic . It has spent more than $5 billion acquiring global freight, warehousing and distribution companies since 2019. Maersk announced during its fourth-quarter earnings call that it would spend another $1.7 billion to acquire North American freight company Pilot   Services.

To finance the transformation, Maersk hopes to extend shipping profits as long as possible by locking customers into high-priced long-term contracts. In 2020, Maersk's long-term contracts accounted for only 50% of its cargo volume , which has risen to 65% now. Maersk expects that by 2022, long-term contracts will account for 70% of its cargo volume.

And the prices of these contracts are still rising: Maersk estimated in its financial report that the average price of long-term contracts has risen from around $2,000 per 40- foot container in 2019 to around $3,800 per container today , an increase of about 90%.

A large portion of Maersk's profits will go into its logistics division, which handles warehousing, delivery and returns on behalf of customers (especially e-commerce customers ) . Its logistics division's revenue is still small compared to ocean shipping, but it is growing rapidly. Revenue increased from $7 billion in 2020 to $9.8 billion in 2021 , a year-on-year increase of 41%.

Maersk's logistics investment is part of the company's long-term strategy. Maersk believes that the future of its business will be to transform into an "end-to-end logistics partner", which means linking its business with e-commerce .

Over the past two years, Maersk has acquired e-commerce logistics companies in Europe (B2C Europe Holding), Asia (LF Logistics) and the United States (Visible Supply Chain Management and The Performance Team), bringing its total number of warehouses and distribution centers to 549. Maersk's acquisition of Pilot Freight gives the shipping giant control of one of the 50 largest freight companies in North America.

Maersk

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E-commerce