The world's largest container shipping company Maersk has canceled over 50 trips to and from Asia due to slow demand from the coronavirus outbreak.
According to Maersk, it had a "very weak" start to the year as the coronavirus outbreak has kept some factories in China closed and pulled down the demand for the transport of goods.
Since the extension of the Lunar New Year holiday due to the outbreak, the Danish ship operator has canceled over 50 trips to and from the region. It also expects shipping rates to decline as the demand continues to fall.
In an earnings call, Maersk chief executive officer (CEO) Søren Skou said: "We estimate factories in China are operating at 50% to 60% of capacity." While the company expects production to be at 90% by the first week of March, Skou warned that "obviously there are still a lot of uncertainties."
In an interview with Julia Chatterley on CNN Business' First Move, he said that 30% of Maersk's business is related to China, making the impact of the outbreak "quite substantial."
The United Nations Conference on Trade and Development pointed out that around 80% of world goods trade by volume is carried by sea and that China has seven of the world's 10 busiest container ports. This means that the outbreak could have a critical impact on global shipping.
As a result, Maersk forecasts its earnings at around $5.5 billion for the year, which is about 5% below what analysts had been predicting.
Skou continued: "The coronavirus impacts all our businesses. We also have a terminals business in China, and a significant logistics and warehousing business. It's not just ocean."
He explained that the company expects exports from China to be "very weak" in February, "quite weak" in March, and "hopefully a strong rebound into April, May and June." This is based on an "external consensus" that the virus will peak in the coming weeks.
