A.P. Moller-Maersk has painted a bleak picture of global supply chains in an operations update released Friday.
The update comes at a time when supply chains are under severe strain, with historic congestion and bottlenecks affecting almost every aspect of shipping, with about 10% of container ship capacity waiting in or out of stuck ports, with no sign of improvement this year, according to Maersk CEO Soren Skou.
“There have been many difficult periods over the years, but the situation of the last 12 months is unique in that it has had a global impact. All continents are experiencing high volumes and operational challenges, which constrains shipping and land transport capacity at the same time,” Maersk said in its update.
“Like all carriers, Maersk has been greatly affected by the COVID-19 outbreaks that have slowed down local operations. Regardless of whether it is a port, vessel or warehouse, when one is affected there is a rapid downward spiral as delays accumulate. We see pockets of improvement, only to get setbacks when our operations encounter new COVID-19 outbreaks and blockages,” he said.
As an example, Maersk points to the situation in Vietnam, home to several factories and warehouses, where COVID-19 cases are increasing and shutdowns continue.
“This has a direct impact on our sailings and our ability to export their goods. It’s not that vessels don’t sail, but even in the best case scenario, a 1-3 day delay at one port in a 12-port rotation often means that a 10-week round trip can take 11 to 12 weeks,” Maersk notes.
According to the company, with this situation, customers not only in Asia and North America, but around the world, will experience a direct impact on their supply chain. In Europe, for example, there is waiting time to berth in almost all major ports due to labor shortages and high shipyard density that slows down efficiency.
“To address these challenges, we have deployed more vessels and containers than before the pandemic, but we continue to see unfortunate delays that result in lost sailings and capacity. We are trying to optimize all corridors in rotation, call alternate ports and actively reposition empty containers, all with the goal of leaving as little unused capacity as possible on all legs. However, experiencing sudden and significant spikes in demand, the situation remains testing,” Maersk said.
Maersk adds that it has been working diligently to communicate the issues facing the supply chain, both negative and positive. But if Maersk has a message, it would be this:
“From a customer perspective, our advice remains: please prioritize your cargo.”
However, as the old saying goes, “One man’s pain is another man’s pleasure.” For Maersk, the current “exceptional market situation” is expected to drive massive profits for the company, with underlying EBITDA now expected to be in the range of $22-23 billion in 2021.