Maersk planning for tariffs to hit hard in 2019
A.P. Moller - Maersk expects tariffs to take a bite out of the ocean shipping industry in 2019, according to executives on a recent earnings call.
The carrier will meet this contraction by "rightsizing" its capacity on the Pacific routes out of the U.S. — a process that has already begun, according to Chief Commercial Officer Vincent Clerc, since West Coast ports are already forecasting a slowdown in the new year.
"As the tariffs start to come into effect in January, we are likely to see — we expect to see, a significant slowdown in demand of imports into the U.S. as a lot of customers have actually accelerated their purchase orders to get them into the U.S., before," said Clerc.
It's been an eventful year for Maersk. The company finalized a merger with Damco, launched the blockchain platform TradeLens with IBM, integrated Hamburg Süd and introduced instantaneous digital booking.
But CEO Søren Skou said investments are likely to slow down next year as the company deals with the challenges at hand and works to reduce its debt and grow existing secondary services like supply chain management, warehousing and distribution.
"The fact that we're underweight market share wise in the Pacific is actually something that comes in quite handy right now," said Skou on the call.
Tariffs are hurting back haul revenue out of the U.S., said COO Søren Toft, but with tariffs on $200 billion in imports from China set to increase from 10% to 25% on in January, carriers are bracing for volume dips.
But tariffs are just one challenge coming to the industry next year.