Maersk will cut thousands of employees, as weak demand and plummeting freight rates cause revenue to decline.

On November 3, Maersk – one of the world’s leading shipping companies – announced that third-quarter revenue decreased by nearly 50% compared to the same period last year, down to 12 billion USD. They said they have cut 6,500 employees this year because of “challenging market conditions” and plan to cut another 3,500 people, mainly in the next two months.

Thus, the company’s number of employees will decrease to less than 100,000 people. “Our industry is facing a new reality, with weaker demand, freight rates falling to historical levels and inflationary pressures driving up costs,” Maersk CEO Vincent Clerc said in a statement.

This company’s shares yesterday fell by 17.2% on the Danish stock exchange, to a 3-year low, after the above information.

Last year, Maersk announced record profits, with 36.8 billion USD. However, for months they warned that high freight rates would not last. During and after the pandemic, skyrocketing demand for goods and disrupted supply chains have pushed up freight rates. However, this trend is gradually cooling down due to the gloomy macroeconomic situation

“Transportation demand will be strong if the economy goes up. But if the outlook is gloomy, the situation will reverse,” said Russ Mold – Investment Director at AJ Bell.

According to Drewry Shipping, the shipping cost for a 40-foot container (carrying large volume goods) at 8 major global shipping routes is 1,406 USD this week. Compared to the same period in 2022, this price is 54% lower.

Maersk still maintains this year’s pre-tax profit forecast in the range of 9.5-11 billion USD. However, they believe that the actual level achieved may be around 9.5 billion USD.