Maersk Forecasts Strong Growth in Global Container Trade Despite Supply Line Disruptions

A.P. Moller-Maersk A/S, a leading indicator of global trade trends, has announced a robust beginning to the year, which has brightened the prospects for worldwide container trade demand.

Copenhagen-based Maersk said, The global container trade is expected to grow by 2.5% to 4.5% this year, with current expectations leaning towards the higher end of this range, repeating its forecast range given in February. Maersk is making plans to extend the current rerouting south of the Cape of Good Hope, potentially for the rest of the year, to avoid the Red Sea, it said.

Various disruptions are impacting the world’s supply lines, with the most significant being the Houthi militant attacks in the Red Sea. These attacks have resulted in an approximately 80% reduction in container line transits through the Suez Canal, according to Bloomberg Intelligence. Furthermore, ongoing drought conditions have restricted passages through the Panama Canal, and the destruction of the Francis Scott Key Bridge has rendered the Baltimore harbor inaccessible to large vessels.

“We had to redo our network to much more permanently sail south of the Cape,” Chief Executive Officer Vincent Clerc said in an interview on Bloomberg TV. “Our view right now is that, as a minimum, we will be well into the second part of the year before we can even consider restarting the network.”

Oystein Vaagen, an analyst at Fearnley Securities, noted in a client memo that the shares had surged nearly 20% over the past month, fueled by expectations that elevated freight rates might prompt Maersk to revise its forecast upward. However, Vaagen expressed disappointment with the company’s guidance, despite an upward adjustment to the lower end of its financial outlook.

Maersk has now revised its projected underlying earnings before interest, tax, depreciation, and amortization (EBITDA) for the year to a range of $4 billion to $6 billion, citing a robust container market and disruptions in the Red Sea. This contrasts with its previous forecast of $1 billion to $6 billion.

The additional vessel capacity required to circumnavigate Africa is driving up freight rates, particularly at a time when the market was expected to enter a downturn following the pandemic as ship supply surpasses demand. Maersk still anticipates a surplus in capacity, which suggests lower rates in the second half of the year.

Vaagen cautioned that if Maersk’s guidance doesn’t reach the higher end or exceed it, freight rates may decline rapidly in the latter half of 2024.

“The likelihood of us continuing to sail south of the Cape by year-end has significantly increased compared to three months ago,” remarked Clerc in the interview.

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