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Maersk Raises Guidance Amid Worsening Port Congestion and Rising Freight Rates

Mike Schuler
Total Views: 4388
June 3, 2024

A.P. Moller-Maersk A/S (APMM) sees worsening port congestion, especially in the Middle East and Asia, and further increases in container freight rates thanks to a combination of strong container market demand and disruption from the Red Sea crisis.

As a result, Maersk has significantly upgraded its full-year 2024 guidance. The company now anticipates an underlying EBITDA of US $7 to $9 billion and an EBIT of $1 to $3 billion, marking a substantial increase from the previous guidance of $4 to $6 billion and -$2 to $0 billion, respectively.

“This development is gradually building up and is expected to contribute to a stronger financial performance in the second half of 2024,” Maersk said in a trading update.

Moreover, the company now expects a free cash flow of at least $1 billion, a positive shift from the previously projected cash flow of at least -$2 billion.

Earlier on Monday, Maersk said it has seen significant delays in vessel schedules due to severe terminal congestion, particularly in Mediterranean and Asian ports. The congestion has resulted in extended waiting times at some ports, impacting Maersk’s ability to maintain regular schedules.

Since November, missile and drone attacks in the Red Sea and Gulf of Aden by the Yemen-based Houthis have forced services to reroute around the Cape of Good Hope. This has resulted in longer voyages and skyrocketing freight rates, despite a record number of new vessel deliveries.

Industry experts have been warning of ripple effects from the reroutings, including bottlenecks, vessel bunching, and shortages of equipment and capacity.

However, Maersk cautions that trading conditions remain volatile given the unpredictability of the Red Sea situation and unclear future supply and demand.

The company is set to publish its Q2 interim results on August 7, 2024.

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