Who is Driving Global Economic Growth?

Trade growth has slowed since 2012, relative to both its strong historical performance and to overall economic growth. According to data provided by the IMF, the overall weakness in economic activity – in particular in investment – has been the primary restraint on trade growth. Also contributing to the slowdown has been the waning pace of trade liberalization and the recent uptick in protectionism. Average annual global output growth through 2021 is estimated to be 3.0 percent.

The global economy remains sluggish moving into 2017, but the growth outlook is nevertheless somewhat stronger than in recent years. After slow momentum in 2016, global growth is projected to recover to 3.4 percent in 2017. This forecast reflects a more subdued outlook following the June 2016 U.K. vote in favor of leaving the European Union (better known as Brexit), as well as weaker-than-expected growth in the United States. Financial market sentiment toward emerging market economies will continue to improve in 2017, with emerging Asia in general and China and India in particular seeing the highest levels of dynamism over the next five years.

emerging markets performance

After years of increasing global economic integration, politicians are facing significant political pressure to limit imports. In June 2016, the WTO reported that the application of new trade restrictions by G20 economies reached its highest level since the organization began monitoring them in 2009. This increased protectionism is one reason why global trade remains below its pre-crisis peak, and continues to suffer from slow growth. The WTO estimated that trade expanded by a mere 1.7 percent in 2016, the slowest pace since the global financial crisis

Geopolitical tensions have been rising, leading to territorial disputes and international sanctions. At the same time, domestic politics is becoming more unpredictable in many countries around the world. Because of this, progress on multilateral free trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP) are increasingly unlikely to be ratified in the short to medium term.

Addressing the general weakness in economic activity, especially in investment, will stimulate international trade. This could in turn help strengthen productivity and growth. In addition, further reforms that lower trade barriers would boost the international exchange of goods and services, and in doing so it will revive trade and encourage growth.

Maersk Line Repeatedly Shows Container Shipping is Profitable

Despite challenges in the container shipping industry, Maersk Line saw continued improvement over its Q4 2015 performance, with a Q1 2016 profit of US$37 million. The Maersk Group as a whole delivered a profit of $224 million ($1.6 billion)

Given where the markets are, it’s a good set of results, without bragging. – Chief Executive, AP Møller-Maersk

For most industry watchers, Maersk Line’s performance is regarded as an important indication of the state of the container shipping sector, and certainly provides valuable insight into the performance of the world economy and global trade.

The volume handled by the container shipping leader has grown seven percent year-over-year to 2.36 million FEUs. This increase was complemented by a 10 percent decrease in total operating costs and a 48 percent decrease in the price of fuel, which partnered to lower the average unit cost of transporting a container by almost 5 percent to US$2,060.

We improved our financial performance compared to the fourth quarter in 2015 despite continued drop in prices. In a market with record low freight rates, we won market share, drove down cost and continued to deliver positive free cash flow, enabling us to fund our own growth. – CEO, Maersk Line

The reductions to capacity made in the last half of 2015 have consistently increased utilisation, especially on its container shipping services from Asia to Europe, and are contributing to the company’s improved performance.

maersk line high utilization of vessels

Our network is now operating with very high utilisation and our vessels are full in the Asia-Europe trade. – CEO, Maersk Line

The worldwide demand for maritime shipping container transport is still expected to increase by one to three percent. To defend its market leading position, Maersk Line says that it intends to grow at least with the market and, like many other investors, profit from investments in global trade.

We expect the market to pick up towards the third quarter of 2016. In this quarter, we expect some upward price momentum ahead of the traditional peak in the third quarter. – CEO, Maersk Line

In keeping with their investment and growth strategy for emerging and developed markets, Maersk Line has announced three new services. The Seago Line’s Irish Sea service, SeaLand’s Atlantico service, and Maersk Line’s Transpacific TP18 service have been established to provide new trade opportunities to customers in Mexico, the United States, China, The British Isles, West Africa, and the Mediterranean.

maersk line thinks there is light on the horizon

We think there’s light on the horizon with the current turmoil in the container shipping industry potentially resulting in the elimination of industry overcapacity. – Chief Executive, AP Møller-Maersk

Maersk Line reported that at the end of 2015, its operating margin was five percentage points higher than the average of its rivals.

Time and again Maersk Line has demonstrated that, despite challenges, there are profits to be made in the container shipping industry. To be equally successful in their own approach, investors must carefully research opportunities and review investments to determine where the best opportunities are to be found.