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A.P. Moller-Maersk A/S is a bellwether of global trade. It said that the ripple effect from the congestion at the Red Sea has a greater impact on the world’s supply chains than was previously expected.
The container carrier based in Copenhagen raised its profit forecasts late on June 3, as the disruptions have effectively removed capacity from the global fleet, thereby increasing freight rates.
Maersk is ranked No. 5 on the Transport Topics Top 50 global freight companies list. Transport Topics Top 50 global cargo companies list places Maersk at No. 5.
Maersk has raised its forecast for the second time in a little over a month, as Houthi militants attacks in the Red Sea forced it and other companies to sail south from Africa. Bloomberg Intelligence estimates that the disruptions have reduced container-line transits in the Suez Canal by about 80%.
Maersk upgrades full-year guidance.
Learn more in our press release here: https://t.co/oiyofwq74d #maersk pic.twitter.com/efamwwKNyg — Maersk (@Maersk) June 3, 2024
Maersk stated on June 3 that they also see signs of further congestion in ports, especially in Asia, the Middle East and Africa, which is driving rates up. The company also said that the demand for containers has remained “strong”.
Maersk stated that “this development is gradually building and is expected contribute to a better financial performance in 2024’s second half.”
Lee Klaskow is a Bloomberg Intelligence Transport Analyst. He said: “Earnings expectation will need to be raised for Maersk as well as the broader liner industry amid a surge of freight rates due to increased port congestion, and an earlier peak in demand due to the dislocation caused by the Red Sea Crisis. Strong pricing will continue as long as ships cannot safely navigate the Suez Canal.
Maersk’s earnings before interest, taxes, depreciation, and amortization are now expected to be $7 billion to $8 billion this year. This is a significant increase from the previous forecast of $4 to $6 billion. Bloomberg’s estimates showed that analysts expected an average of $5.86 billion.
Maersk shares in Copenhagen rose by as much as 3,7% at the opening of trading on June 4. In May, rates were rising and they had already gained 22 %. According to Morgan Stanley analysts including Cedar Ekblom in a note, the earnings upgrade was “not a shock” to the market.
Analysts said that “the Red Sea disruptions only provide temporary respite from the structural oversupply of container shipping.”
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