AP Moller-Maersk: Danish shipping giant forced into profit warning as Chinese demand ebbs

Beijing rate cut comes too late to protect Maersk from falling orders to transport goods

The world’s biggest shipping container business, Denmark’s AP Moller-Maersk, has become the latest company to suffer in the global slowdown triggered by the slowing economy in China, where the government cut interest rates for the sixth time in less than a year.

Maersk issued a rare warning as bosses said that profits will be around $600m (£390m) lower than had previously been expected, down from an anticipated $4bn to $3.4bn.

The company said the container shipping market declined in September and October, with little chance of recovery during the rest of the year.

Fewer containers were carried than expected, with average freight rates 19 per cent lower than during the same period last year.

Routes between Asia and Europe have been particularly weak, with Bloomberg Intelligence explaining that the World Container Index had hit a record low for a third consecutive week, with two of the eight biggest world trade lanes at all-time lows.

The Asia-Europe routes are Maersk Line’s most lucrative, but with the Chinese economy slowing and manufacturing data proving particularly weak, demand for shipping goods has suffered.

China’s weak economy was in the spotlight again as authorities attempted to kickstart spending again by cutting rates and slashing the amount of money that banks need to hold in reserve.

Officials are desperately trying to boost the economy after it was revealed earlier in the week that growth dropped below 7 per cent for the first time since the financial crisis in 2008. It could fall to a 25-year low in China if that trend continues.

On Monday, at high-level talks in Beijing, an economic blueprint for the next five years will be drawn up.

Imports into the country have fallen, including a drop in September for the 11th month in a row, hitting commodity prices around the world, as well as the Maersk shipping business.

Nils Andersen, chief executive of the Danish giant, said: “It is regrettable that we have to adjust our expectations for the 2015 result. All of our business units delivered a positive result in the third quarter, despite difficult conditions across our industries.

“Maersk Line has over the years taken steps to ensure a cost-effective and resilient operation, but the current deterioration in the container shipping market is impacting our business.”

A shipping service from the Middle East to Europe has been closed and other routes are now under review, but the changes are unlikely to make a difference by the end of the year.

Bosses are also undertaking a deeper analysis to see whether the slowdown is a blip or an indication of slower growth in global trade that is likely to persist, and considering raising prices to generate more cash.

Maersk also cut its forecast for global trade growth two months ago and abandoned some medium-term profit forecasts for the group, despite recording better than expected first half sales. It said container demand would only grow by between 2 and 4 per cent, against previous guidance of 3 per cent to 5 per cent.