Maersk Sees Deeper Impact to World Trade From Red Sea Disruption

By Christian Wienberg (Bloomberg) —

A.P. Moller-Maersk A/S, a bellwether for global trade, said the world’s supply lines are more impacted than previously expected by the ripple effects coming from the congestion in the Red Sea.

The Copenhagen-based container carrier raised its profit outlook late Monday as the disruptions effectively remove capacity from the global fleet and thereby boost freight rates.

It’s the second time in about a month Maersk hiked its forecast as Houthi militant attacks in the Red Sea have forced it and other shipping companies to sail south of Africa. The disruptions have cut container-line transits through the Suez canal by about 80%, Bloomberg Intelligence has estimated.

Maersk said on Monday that it also sees signs of further port congestion, especially in Asia and the Middle East, which is causing rates to soar. In addition, demand in the container market has continued to be “strong,” the company said.

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

Maersk now sees underlying earnings before interest, tax, depreciation and amortization at $7 billion to $9 billion this year, compared with a previous forecast of $4 billion to $6 billion. Analysts expected $5.86 billion on average in estimates compiled by Bloomberg.

Maersk shares rose as much as 3.7% in Copenhagen at the open on Tuesday. They had already gained 22% in the month of May as rates climbed. The earnings upgrade is therefore “not a surprise” to the market, Morgan Stanley analysts, including Cedar Ekblom, said in a note.

“Structural oversupply in container shipping remains, Red Sea disruptions provide only temporary respite,” the analysts said.

What Bloomberg Intelligence Says:

“Earnings expectations will need to move higher for Maersk and the broader liner market amid a surge in freight rates from increased port congestion and an earlier start to peak demand from the dislocation created by the Red Sea crisis. Strong pricing will remain as long as ships can’t safely traverse the Suez Canal.” —Lee Klaskow, BI transport analyst

© 2024 Bloomberg L.P.

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