(Bloomberg) -- The global transport disruptions caused by the conflict in the Red Sea will last longer than expected and won’t be solved this year, according to A.P. Moller-Maersk A/S, a bellwether for world trade.
The comments come as Maersk on Thursday raised its financial guidance for a third time in three months as higher freight rates continue to boost the company’s profits. The global liner industry has been upended by conflicts that are forcing ships to sale south of Africa rather than through the Suez Canal.
The Danish shipping group now sees underlying earnings before interest, tax, depreciation and amortization of $9 billion to $11 billion this year, compared with a previous forecast of $7 billion to $9 billion. Analysts had expected $8.76 billion on average in estimates compiled by Bloomberg.
Maersk had already raised its full-year profit forecast in May as well as in June, when it said congestion in the Red Sea was having a larger than previously expected impact on the world’s supply lines. That disruption is “now expected to continue at least until the end of 2024,” the company said on Thursday.
The number of container ships passing the Suez Canal is down about 77% from a year ago, Bloomberg Intelligence estimates, after attacks by Houthis have made the key water route unsafe. The extra vessel capacity needed to sail around Africa has pumped up freight rates at a time when the market was entering a post-pandemic slump with ship supply exceeding demand.
“Trading conditions remain subject to higher than normal volatility given the unpredictability of the Red Sea situation and the lack of clarity of supply and demand in the fourth quarter,” Maersk said.
The transport company also raised its forecast for 2024 global container trade, now saying it expects growth of 4% to 6%. That compares with a previous estimate that was at the upper end of a 2.5% to 4.5% growth range. Maersk’s free cash flow in 2024 will be be at least $2 billion, compared with at least $1 billion seen previously.
Maersk shares initially rose as much as 4.2% in Copenhagen, before trading 0.7% lower as of 3:06 p.m. local time.
“The strong development in container freight rates in recent months makes the guidance upgrade somewhat expected,” Brian Godsk Borsting, chief analyst at Danske Bank Credit Research, said in a note.
Maersk also published preliminary second-quarter revenue and profit numbers — ahead of a full report due Aug. 7 — which missed average analyst estimates.
--With assistance from Niclas Rolander, Alastair Reed and Sanne Wass.
(Updates with chart and adds comment from analyst in second-last paragraph)
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