A.P. Møller - Mærsk A/S (MAERSKB) Earnings Call Transcript

Welcome, everyone, and thank you for joining us on this earnings call today as we present our second quarter results for 2026. My name is Vincent Clerc. I'm the CEO of A.P. Moller Maersk. And with me in the room today is our CFO, Robert Erni. Let me start with the overall highlights for the second quarter. At the macro level, market demand continued unabated despite the disruptions from the war in the Gulf, driven by Far East exports on almost all trade lanes. Exports from the Far East grew for the third consecutive years, while the backhaul volumes were stagnant or negative. This has led to significantly more imbalanced trade flows and increased congestions in various regions, including Europe, the East Coast of South America, West Africa and the Middle East as volume levels are challenging the limits of ports and landside infrastructures in these regions. These bottlenecks quickly translated into significant and sustained increases in the spot rate from mid-May, which not only had a significant effect on this quarter, but will -- but we expect will affect the outlook for the rest of the year. which I will get to shortly. If we look at the financials on the back of higher spot rates in Ocean, we delivered an EBITDA of $3 billion and an EBIT of $1.6 billion. Free cash flow turned positive again at $549 million, supported by higher earnings albeit partially offset by a buildup in work on working capital driven by higher receivables as a consequence of higher rates and by bunker inventory because of higher energy prices. As you may have seen, we have upgraded our guidance for the full year. Based on market volumes growth of about 4%, we now guide for an underlying EBIT of $4.5 billion to $6.5 billion and a positive free cash flow. We'll return to the guidance later in the presentation. But looking at the operational highlights by segments. In ocean, we leverage the agility of our network and made the necessary operational adjustments to adjust to the new situation in the Middle East and successfully increased volumes in other corridors. Weekly volumes are now consistently above pre-war levels. As we indicated last quarter, we successfully implemented commercial measures during March to recover elevated costs linked to the Middle East situation on contracts as well as at our spot business. Separately, the continued strong market demand and more imbalanced trade flows have led to increased congestions in multiple geographies and a second round of increased in a spot rate from mid-May. On the Red Sea, we have gradually been reintroducing services through the Bateman dep Strait with 4 services to date, the first 1 being announced in -- on July 6. These make up about 1/3 of the volumes that would ordinarily be transiting through the Strait and the Suez Canal. We continue to monitor the security situation in the region and are prioritizing the safety of cruise, cargo and vessels in every transit that we make and in the decisions on the return of other services. In Logistics & Services, the broad commercial momentum that the team has built over the past quarter supported growth across the portfolio. We saw continued margin improvement in both of our new segments of Forwarding and Land side, which contributing to further EBIT margin improvements to 5.1% for this quarter. The Gulf region has been impacted by the effective closure of the Strait of Hormuz, but we have managed to protect our customers' supply chains through the use of language solutions. In terminals, we continue to grow the portfolio through a new greenfield investment that we announced in Danang in Central Vietnam. And as far as the existing portfolio goes, we delivered strong top line growth while demonstrating disciplined cost control to drive improvement in both profit and margins. Now looking at the strategic priorities we had set for ourselves at the start of the year, starting with Ocean. On growth, we have delivered good volumes growth at around 4% on the back of strong market demand and operational delivery as we quickly adjusted for the disruption in the Middle East. On PROTECT, our high asset turns, the volume growth have outpaced the fleet growth by 2 points, thanks to the efficiencies that Gemini has delivered. Utilization remains very high at 96% with strong discipline in our fleet management. Gemini is now fully in the base, so future asset turn uplift will likely be less pronounced, meaning that volume growth will be more in line with fleet growth in the coming quarters. Moreover, this with utilization already at a high level, the task for us will be to ensure that we have the capacity to grow. And we will use various levers to ensure that we continue to do so. On focus on profitability, higher spot rates from the strong market demand and the ensuing congestion drove strong ocean earnings for the quarter. The cost increase from the Middle East conflict on contracts was recovered through surcharges and banker formula. Finally, with Gemini now fully implemented for a 12-month period, we can confirm that the ocean cost benefit came in at about $950 million just above the upper range previously communicated of $700 million to $900 million. Turning to logistics and services. This quarter, we have introduced a new reporting structure that we announced earlier in the year. Going forward, we will report logistics and services across 3 segments, namely Forwarding Solutions and land side. At high level, Forwarding comprises air and ocean following product solution -- products, while solution comprises contract and lead logistics product and landside comprises inland and ground trade products. This change is designed to give greater value for customers through clearer and better product categorization, simplify our logistics and services portfolio and organizational structures internally and improve comparability with our peers in the industry. Through this, we will also give you a better view and understanding of where growth and margin progressions are coming from across the portfolio. As you will recall, our priorities in Logistics and Services are to improve growth and accelerate margin improvement. On the first priority, the business delivered very strong revenue growth of 15% in the quarter, driven both by volume growth in most products as well as higher rates. The high growth this quarter is a testament to the growth platform that we have been building over the years and whilst we are pleased with the growth over the past couple of quarters, we are certainly not complacent and continue to work hard to grow this business sustainably. As I mentioned, Landbridge solutions helped mitigate disruptions from the Middle East situation, illustrating the value of the integrated model for our ocean customers. On the margin improvement, we continued to deliver progress with this quarter being the ninth consecutive quarter with year-on-year EBIT margin improvement. Our margins in forwarding and land side are strong. But we have to acknowledge that solutions still needs improvement. The focus here is on converting the warehousing pipeline, reducing white space and improving operational efficiencies as the new business is won and ramps up. Overall, the business has shown that it can grow and improve margins at the same time. And these remain key priorities for us for the remainder of the year. Turning to terminals. The priorities remain to grow through existing and new locations and to maintain long-term profitability. The segment continues to perform well in that regard. It delivered strong revenue growth of 11%, driven mainly by revenue per move, illustrating the strong pricing power on the terminal side now as most terminals are full. New locations, including Giga in Croatia are ramping up and helping compensate for volume impacts from disruptions in the Middle East, most notably our lower volumes in our gateway terminal in Bahrain. We also continue to expand our portfolio with our greenfield investment in Dana in Vietnam. I'll add a few more words on this 1 very shortly. On profitability, terminals continued to deliver strong return on invested capital of 14.8%, while at the same time, investing for growth. As we have signaled, with the series of new investment we undertake, we expect some pressure on the ROIC during the buildup phase, but return on the existing portfolio will remain strong. Let me briefly highlight that -- let me briefly highlight the Danone facility, which is an excellent example of the type of long-term infrastructure investments we want to achieve in terminals. APM Terminals, together with our local partner, Hateco Group won a competitive tender process to develop a new multiuser terminal in Danon in Central Vietnam. The port is strategically located in a region of Vietnam that is growing fast and is poised for long-term economic growth. The concession agreement with the Danon government gives our consortium exclusive rights to operate and expand the non container ports for 50 years. This builds on the partnership with taco following the opening of the Haifeng terminal in North Vietnam last year. The terminal will include 8 deepwater birth with a total throughput capacity of more than 5.7 million TEU per year once fully built out. Our terminal will serve the growing Central Vietnam gateway market as well as the neighboring countries of Laos and Cambodia, Thailand and Myanmar, as indicated on the map. The Phase 1, comprising birth 1 and 2 will already go live in 2029. This is exactly the type of locations where we see long-term value creation, a strategic gateway for a growing market and an opportunity to build a state-of-the-art green and smart container terminal with a partner we know well. Before I hand over to Robert for the financial review, let me take a step back and talk more broadly about the developments in the ocean markets that have led to the change in outlook and financial guidance for the year. Container market demand has been extremely resilient. This growth being driven by exports from Asia. This has continued relentlessly despite various events such as the war in the Middle East or a new round of tariffs. Demand out of Asia grew 6.2% in Q2 alone, and our weekly volumes today are above what they were prior to these events. This is not a pull forward, but real underlying demand and has led us to increase our expectation of growth in the container market from 2% to 4% earlier in the year to around 4% at the end of June. Additionally, that growth continues to be imbalanced with head holes growth far outpacing backhaul. This means that terminal volumes are growing far faster than container market volume growth given the need to return an ever-increasing number of empty containers on the backhaul. This growth and increasing trade imbalances comes on the heels of about 15 years since the financial crisis where investment into terminal capacity has lagged. With market demand growing faster than terminal capacity, we were bound to hit a bottleneck at some point. To illustrate this, cumulative head hold growth from the Far East over the past 3 years or since 2024, has now been around 25%. With the cumulative global terminal capacity growth only at 10% over the same period. This clearly shows the extreme challenges that some terminals are facing today. Many of them are completely full, resulting in growing congestions in some of the key nodes of our network, which is impacting the global network and not just the local situation because of their criticality. The effect of these disruptions will not be linear. And when a key node like Shanghai, which today has a 12 days waiting time is affected. This will result in sharp rises in rates. Given the resilience of demand, the degree of underinvestment into terminal and the time that it will take to bring terminal capacity online to match these demand -- it means that rate events such as what has happened since May will become more frequent in the years to come. As we look at this year, this is what we've been seeing -- the combination of strong headhaul demand led to increasing congestions and in many key ports, which in turn led to sharp increases in freight rate and finally led to our upgraded guidance. In effect, the bottleneck in the supply chain has -- is now moving from ships to the land side. And this cannot be debottlenecked quickly. And so we believe that we are seeing right now a structural change with the rate environment becoming more benign, albeit still with a lot of volatility remaining. With that broader market perspective, I will now hand over to Robert, who will take you through the financial review.

Thank you, Vincent. We had a good second quarter with results stronger in comparison to both the prior year and the first quarter. This performance was driven by all 3 segments, but in particular, Ocean as high as spot rates and volumes translated into better earnings and stronger cash generation. We delivered revenue of $15.8 billion, up 20% year-on-year supported by strong demand in the container market, higher spot rates in ocean and continued growth across all our segments. The strong revenue growth translated into higher profitability. We delivered EBITDA of $3 billion and EBIT of $1.6 billion, driven mainly by Ocean, while Logistics & Services and terminals also continued to perform well. Fresh Free cash flow was positive at $549 million compared with negative $373 million last year, reflecting the stronger earnings. Our balance sheet remains strong with $18.5 billion of cash and deposits and a net cash position of EUR 1.5 billion. Turning to cash flow. The strong results also translated into improved cash generation in the quarter. Operating cash flow was $2.3 billion, supported by EBITDA of $3 billion. Relative to EBITDA, this implies a cash conversion of 75%. The lower cash conversion compared to the last quarter was mainly due to the increased working capital reflecting higher receivables following the increase in ocean rates and higher bunker inventory because of higher bunker prices. Gross CapEx was $931 million, in line with our annual guidance while repayments of lease liabilities amounted to $863 million. After all of this, free cash flow was positive and better than both last quarter and the same period last year. In addition, we returned $367 million to shareholders during the quarter, which the majority was through the ongoing share buyback program. As I mentioned, the increased earnings was mainly driven by Ocean, so let me spend a few minutes on what happened during the quarter. Revenue increased to $10.5 billion, up 23% year-on-year, mainly driven by rates and further supported by good volumes. Average loaded freight rates increased by 22% year-on-year and 32% sequentially, driven by strong spot rates across most of our trade clusters, particularly Latin America and in Asia. Loaded volumes increased by 4.1% year-on-year to $3.4 million FFE supported by strong market demand driven mainly by Far East exports. Despite various cost headwinds, unit cost at fixed energy decreased by 1% year-on-year. Note that if you exclude the positive impact from the extended useful life of our vessels, which was implemented this year. Unit costs would be slightly up year-on-year. As a result, earnings increased significantly over the first quarter, and we delivered EBITDA of $2 billion and EBIT of $935 million. The increased profitability was mainly driven by the strong development in spot rates, while the commercial measures with contractual customers compensated for the higher cost, higher operating costs resulting from the Middle East disruption. Finally, gross CapEx was $663 million, and while lower than last year, remains within the scope of our annual guidance. The year-on-year improvement in ocean earnings becomes clearer when we break down the main moving parts of the bridge. The largest positive contributor was freight rates, which alone had a positive impact of around $1.6 billion on EBITDA. This included compensation for higher bunker costs, elevated insurance premiums longer dwell times as well as other transshipment and network costs associated with contingent routine. Strong volume growth also contributed positively, adding $185 million. These benefits were partly offset by significantly higher bunker prices following the oil price surge back in May. Bunker prices were up 44% year-on-year, resulting in a negative impact of around $612 million. Container handling costs also increased, mainly reflecting congestion in terminals and higher storage costs across the network. Network costs were broadly stable as higher port charter and transshipment costs were offset by 4% lower year-on-year bunker consumption owing to a Gemini network efficiencies. Taking everything together, the strong spot rate environment and continued volume growth more than compensated for the elevated cost base during the quarter. Turning to Logistics & Services. Logistics & Services continued to make steady progress during the quarter. The business is growing and importantly, continuing to improve profitability at the same time. Revenue increased by 15% year-on-year to $4.2 billion, driven by volume growth across most of the portfolio. EBIT was up 24% to $217 million, up both sequentially and compared to the previous year. Likewise, the EBIT margin increased to 5.1%. The improvement was driven by top line growth, productivity gains, cost discipline and continued efficiency improvements across the business. This was also the ninth consecutive quarter of year-on-year improvement in EBIT margin, reflecting continued operational progress across the portfolio. As we said before, our focus remains on profitable growth and continued margin expansion, particularly in the parts of the portfolio, we still see significant improvement opportunities. On a segment basis, land site was the strongest contributor to margin improvement, benefiting from land bridge solutions offered across the Gulf region. Overall, this was a good quarter with revenue growth of 15% and EBIT growth of 24%. But we are not complacent and continue to target further growth and improved profitability. So looking at our new segments performance across logistics and services, the performance differs across logistics and services. We continue to see strong performance in both forwarding and land side where revenue growth has translated into solid profitability and margin progression. Forwarding delivered revenue growth of 32% and an EBIT margin of 6.4%, supported by good development in both air and ocean forwarding activities. Land site also delivered a strong quarter with revenue growth of 14% and an EBIT margin of 6.3%, reflecting solid execution across the portfolio. The picture is different in Solutions, where revenue increased by 11%, but profitability remains too low. The EBIT margin decreased to 1.7%, while -- which primarily reflects white space associated with new warehouse capacity together with the slow conversion of the commercial pipeline. As a result, our focus remains on improving pipeline conversion increasing utilization across the network and reducing white space costs. But there is still work to do in solutions that performing in forwarding and land sight demonstrates the earning potential of the portfolio when scale, productivity and disciplined execution come together. So overall, the message from this slide is that logistics and service continues to move in the right direction with the next stage of margin improvement coming from improving the profitability of solutions. The final segment that I'd like to cover is Terminals, which once again delivered a solid performance during the quarter. Revenue increased by 11% year-on-year to $1.4 billion, supported by both volume growth and higher revenue per move. Revenue per move increased by 7.1%, reflecting higher rates and increased storage revenue. At the same time, volumes increased by 2.2%, driven mainly by North America and the continued consolidation of Gemini volumes into Lazaro Cardenas. On the cost side, Cost per move increased by 5.3%, mainly driven by labor inflation across the portfolio. Taking these together, EBIT reached $458 million, equivalent to an EBIT margin of 31.6%. Compared with last year, absolute EBIT is broadly stable while the margin decreased. It is important to remember that the second quarter of '25 benefited from a positive joint venture one-off of $45 million. Excluding that item, the EBIT margin was roughly stable year-on-year despite the inflationary cost environment. Return on invested capital was 14.8% compared with 15.4% a year ago. The slight decline reflects the ramp-up of new investments where capital is employed ahead of the full earnings contribution. Gross CapEx was $122 million compared with $141 million in the same quarter last year. Overall, the business continues to combine the resilient earnings, attractive returns and disciplined investment in future growth. Having reviewed the performance across the business, let me finish with our updated outlook for the year. We continue to see a fundamentally stronger and tighter market backdrop than we expected at the beginning of the year. Since our June guidance upgrade, the market dynamics, Vincent, described a become more evident, reinforcing our confidence in the outlook for the remainder of the year. Based on the strong first half performance, better visibility for the remainder of '26 and our continued expectation of container market volume growth of around 4%, and we are upgrading our financial guidance for the full year. In our guide for an underlying EBITDA of $10.5 billion to $12.5 billion, underlying EBIT of $4.5 billion to $6.5 billion and a positive free cash flow. Our cumulative CapEx guidance has remained the same. It stays at $10 billion to $11 billion for '25 to '26 and the same for '26 to '27. With that, we conclude the financial review and will proceed to the Q&A. Operator, please go ahead.

[Operator Instructions]. Our first question comes from Parash Jain, HSBC.

Okay. Congratulation on solid set of results have in certain theme. My question is, if you can help us understand your decision of returning to Suez canal, although gradually, what has changed in the last several quarters or years? Because if anything, what we have seen is a heightened tension not only on the Strait of Hormuz, but also on the Reds. In fact, the vessels flowing through has come down to a pretty low level. we have not seen a similar move by many of your industry peers also. So if you can help us guide how shall we think about this? Is it a beginning of bringing all the vessels into it or it's -- you are testing the water with the few vessels at this point of time. If you can share any color.

Yes. Thank you for the question. So we have today about 1/3 of the volumes or 1/3 of the services that we normally would have going to the canal that are selling to the canal in both directions every week. And that is the part of a gradual return, full return through. All the analysis that we make and all the stakeholders on the military and intelligence side that we speak to will tell us that, as it is today, the conditions for a full return through the Red Sea are met, and that is why we are sending these services through. We don't test the water. We don't compromise on the safety of our crew, the safety of our ships or on our customers' cargo. But we believe that these conditions are met and that the recent developments in rhetoric and attacks on the ground from the Otis are targeted at different segments and different products than what we than what we exercised and therefore, that we are not a target at this stage. I have also to say that this is a very volatile situation. And this is an assessment that we make every day, every time we send a ship, we make the assessment whether the situation is still what we believe that it is for that day and then decide to send a ship on -- every day, we can start to decide to go back around the side of Africa if we felt that's the security situation would change. So for us, we will see -- we will move towards a gradual full return to Babel Manda and Suez.

The next question comes from Christian Nedelcu, UBS.

I have 1 question on ocean capital allocation for the next few years. if I analyze your order book and the age profile of your fleet, I calculate that you're going to have roughly around 12% market share in Ocean by 2030. I believe it used to be 18%, 19% -- you also flagged today the structural congestion that helped ocean rates I guess my question is in terms of capital allocation, how should we think about the next couple of years? Are you happy with having just 12% market share in a few years? Or do you think you need to step up and allocate more capital to the ocean?

Thank you, Christian. It's a very good question because as I mentioned in the speech, I think in the presentation, we have been able to do with Gemini is actually break this and be able to gain and carry more volumes on a fleet that is growing slower than we are actually able to grow the volumes with the current utilization and asset turn, we're starting to reach the limit of what the current fleet can do. And if we want to -- if we believe that the rate environment is going to be more benign in the years to come because of the land side bottlenecks that we see and that we want to protect our position, then we will need to continue to renew our fleet and to invest a bit of capital as well to maintaining not only the replacement of the fleet, but having some level of fleet growth in there.

The next question comes from Alex Irving from Bernstein.

to the previous one. So can you give the stocking point, Intuition terminal capacity worldwide. What does that mean for the evolution of global fleet? You can see the record of high order books, but we like to think that fleet growth in here basically just takes down asset productivity. If it was not the terminal capacity to serve you expand them at our ships in the ocean? Or do you think that we ended partly getting built and ultimately shift to result in higher capacity, higher throughputs, higher container moves placing pressure on freight lets. Just trying to understand that do a little bit better.

I think -- let me try to see if I can answer that. We saw during COVID that when the markets volume suddenly increased, we started to hit the -- or to stretch the limits of what the land side could absorb. And you will remember the long Q that there was in Los Angeles and in many other places around the globe as a result. That's simply because at that time, we hit the ceiling of what the land side could absorb. After the -- normalization after COVID basically alleviated that and we thought we would be free for this for quite a while because of the normalization. What has happened is over the last 3 years, the exports out of the Far East have grown by the 25% that I mentioned in there. And we are now getting to gradually to a place where some of the key nodes that we have, the big ports that we have in our network, they are back into a situation where we are stretching the capacity of what they can cope with. And the fact that trade has become more imbalanced means actually that the container -- the demand for volumes is actually bigger for terminals than it is for us because they -- we only count the full loads when we say around 4% market growth. But for terminals, that around 4% market growth will be 7%, 8% and because the trade becomes more imbalance and they have more empty moves. When you do that 3 years in a row at 7%, 8% you start quickly to get into more and more places where you start stretching what capacity can cope with -- and then you have other disruption, whether it's water levels on the Rhine that disrupt the ability to move containers in line, whether it is trucking power in Brazil. And you have different things like this that only illustrate is not just a terminal thing. The whole land side has been under-invested compared to the growth that we have had investment in ships have followed, maybe even have been ahead of demand. If you look at the order book, but the bottlenecks that we have on the land side are more sticky, and we're starting to feel them. And it's really hard to forecast when we start to have this. But I can give you the example today. The largest part in the world is Shanghai, and ships take 12 days to get through because how congested and full the port of Shanghai is. And that's when they need to load the cargo. When they arrive in Brazil and they have to go through Santos, so they have to go to Gena in Saudi Arabia through the North Continental Europe, they also get delayed because the ports and the infrastructure there is also stretched to the maximum. And so we will hit those, and we will see rate events much more frequently. And the other thing that COVID has changed is when these rate events happened, what is the magnitude of the changes in freight rate and the speed at which they filter through. And you see this clearly, if you start comparing the standard deviations of SCFI post COVID with before COVID, it's very, very different. And it's very hard to forecast, hence, 2 profit adjustments in 6 weeks but when it's there and it's becoming more and more frequent that it's there and supported by the strong market that we see today, then you will see more of that. And what we need to do to -- what would need to happen for this not to be here anymore, is either a significant weakening of demand, which we believe could happen after an energy shock and the Gulf war earlier in the year, but hasn't happened or investment -- catch-up investment round in infrastructure to increase terminal capacity and to increase land side capacity, rail, truck, waterways, so that we can move this more fluidly across the supply chain. And you will know that all of those will take a long time. It takes 7 to 10 years to get a greenfield terminal from the idea to have in it operational. It is taking that amount of years. And so I think that as long as we're having the type of demand that we're having today, and we need to invest in land site capacity to alleviate these bottlenecks and until then, we'll see these bottlenecks as a common feature, not constant, but common feature of the markets that we operate in.

The next question comes from Lars Heindorf from Nordea.

Congratulations on the strong results. I'm trying to get my head around the rate development in the second quarter, which I think surprised most people. If we look at sort of average between most of the leading rate in the seas, they are up on average by I don't know, mid-30s, something like that. You increased your average oso rate by 32% quarter-on-quarter. But if you look at most of the peers, on Hapag, A, CMA, they're up by on average around about 13% quarter-on-quarter. And so basically, the question is, have you done something different this quarter, which ensures you this I mean quite significant outperformance versus the peers in terms of the quarter-on-quarter rate growth. And also if yes, I mean, is this something that will last? Or is this sort of temporary, i.e., again, maybe sort of alluding to what we can expect into the third quarter.

Thank you, Lars. It's hard for me to comment on what competition has done. What I can share with you is what we have done. And why I think that we are very proud of the quarter because the quarter actually rests on a lot of work. The first thing is to really leverage very quickly the redeployment of assets that were suddenly idle because of the situation in the Middle East and redeploy them productively so that you maintain the volume and you keep your costs under control. And I believe that we are today extremely fast and agile at redeploying networks, adjusting capacity and ensuring very, very high asset turns for our network given the trade mix that we have. I think that's 1 of the advantage that we have -- the other thing is we have invested for a long time in digital solutions for the spot rate and the spot market, which allow us to react to these sharp rate events I think, faster than anybody in the market. And this allows us, I think, to act with extreme agility in a world that is more unpredictable and where the changes are more and more meaningful because it's -- there's no elasticity in demand. So when you start to hit a ceiling, the impact on rates becomes extremely big. And so it means something how quickly you can act on it and how quickly you can capture it. That's what I think. I don't think we can -- I don't think at all that we can abstract for market reality. Over time, the market rates are the market rates. But when market is very volatile, the ability that you have to adjust to that volatility faster than anybody else is a competitive advantage. And I think that tentatively what I see in the numbers today say that we've done a really good job this year.

And if I may, just a brief follow-up to which should we then expect that your rates will be more volatile going forward? Because if you look at it historically, there's been -- I mean, your rates -- obtain rates has been far less volatile compared to most of these rate indices.

So it depends on what time horizon you have, Lars, because if you're thinking in a matter of weeks or quarters or years, I think that these bottlenecks that we're up against on the land side, they will appear and resorb themselves as seasonality and trade growth and shifts and new capacity comes online and so on. So there will not be a constant feature where the rates are just high for longer. And as some of these bottlenecks disappear then the rates will normalize as they appear somewhere else, they will shoot up again. I think what will be a feature is continued volatility on the rates over the coming years. But with significant -- but with a higher average than what we have seen because of the frequency at which these bottlenecks start to urge. I think that we're moving into something where what constrains or determines the rate levels is more the inland capacity to absorb the volumes that we bring with our ships more than how many ships we put in the water.

The next question is from Alexia Dogani. JPMorgan.

I'm slightly surprised as an observation, the big shift in narrative compared to last quarter because now we're talking a lot about structural changes in the market, trading balance is persisting and needing more ships, given kind of port congestion structurally. I guess what has fundamentally changed? And specifically, I don't quite understand why headhold volume growth has been so strong, especially, let's say, Asia to Europe. Can you explain to us what kind of sector verticals are really growing, what has really driven that kind of step change because we can see typhoons impacting congestion in Asia, really my observation is that demand has accelerated substantially. What has driven this substantial acceleration in demand in your view? And -- given your comments now, should we, therefore, be thinking that the order book of 40% could actually go towards 60%, which is the big the industry saw in 2009?

Thank you, Alexa. I think I'm also surprised by -- and what surprises me is the strength and the resilience of market demand? I think our imagination at least has been constrained by all the talks about trade wars and deglobalization and by the view that the Iran conflict would unleash an energy crisis that would be -- that would have also a negative impact on global demand. Despite years of talk about deglobalization and despite the uncertainty around oil prices, what we have seen is that demand for container transport is basically shrugging off all of that, and you see no sign in the number that any of that deglobalization talk or any of that energy crisis is actually denting demand level. I think that's -- for me, compared to where I was 3 months ago, that's a key thing that has changed. It seems that the market is so resilient that it can shrug off these shocks and keep on pumping volumes at an unchanged level. That's the first thing. The second thing is the compounding effect of having 3 years in a row of strong growth, which is only 1 way basically in trade flows. We've been looking at strong growth, but I think we've only started to realize what one-way trade growth means for landside infrastructure because if only your import growth you basically need 2 trucking moves per every import rather than have 1 trucking move for an import and on trucking move for an export. So you need more trucking powers just to met the same amount. You need more terminal capacity because you have more empties that you need to remove. So I think there is a compounding effect there which is hitting some limitations because there has been a relatively subdued view towards how much the market was going to grow, and so how much infrastructure investments you would need on the land side. And we've not put enough terminal capacity, trucking power has been an issue for a long time. Some of the waterways, especially in Europe right now, are severely affected by water levels and other issues. And all of these kind of tightened the news around the supply chain. And it's hard to see when you're going to hit those limits. But when you do, then the reactions on prices are strong. The other thing that is changing is actually what we're moving. So what is in the container is gradually changing. For a long time, the main feature of what we were moving from the Far East was what we would call general department store goods. Anything from furniture, footwear, clothing, food stuff, stuff like that, that was very, very subject to conjuncture and consumption. What we have seen since COVID is as the export from the Far East have boomed, we are seeing a lot of -- it's more the industrials that are actually driving the growth. And it is anything that is related to electrification from storage, so batteries, solar panels, parts for either solar panels, wind mills, turbines, grid, electricity grid, anything that has to do with electrification, cooling units for data centers and other things, EVs, so anything that has to do around electrification and the ways to build more power capacity is driving demand for industrial products, which whose production base is very Asia-centric and Asia dependent. And that is a lot less subject to conjuncture than what you have because if you have a big contract to build a big sun park, whether there is a higher oil price or not, you're going to need to move the solar panels and the infrastructure to get that sun park built. So that's I think something that for me is a shift. We will become less seasonal and more subject to industrial verticals as long as this macro trend will continue to materialize. And this is not only a U.S. issue. This is Europe, this is India. This is the Middle East, this is Latin America. This is Africa. We see this across the whole world where large Asian companies are exporting more and more of these components into those geographies in those markets. What all of this means is, I still think that the order book is -- reflect a very optimistic view on the world, but I think so less and less as long as this trend continues because if I have a total market growing 4%, but the headhaul demand growing 7%, 8%, I need 7%, 8% capacity more every year just to be able to carry stuff. And so I don't know where the order book is going to end, but I think that this is less of a constraining factor. And I'm actually more looking now at how quickly are some of the nodes that are most stressed in the network, how quickly can these bottleneck be resorbed. And I would say -- if you look at Santos, if you look at Apapa in Nigeria, if you look at the North Continent of Europe, if you look at the U.K., if you look at other places in the market, it's not -- those are not easy bottlenecks to resorb and it's going to take a while. have been building up for 15 years. And it will take a while to undo them.