Maersk revises full-year guidance, expects Red Sea crisis until year-end

Maersk has stated that disruptions to shipping caused by the Red Sea crisis are expected to persist until the end of this year. Despite a significant decline in quarterly profits for the Danish shipping giant, its performance still exceeded expectations, leading to an upward revision of its full-year profit outlook.

As a global trade barometer, Maersk points out that demand for container shipping remains robust, and with vessels avoiding the Red Sea and diverting around Africa, container shipping demand growth for this year is expected to be in the range of 2.5% to 4.5%. Based on this optimistic outlook, Maersk has raised its forecast for full-year earnings before interest, taxes, depreciation, and amortization (EBITDA) for 2024 to between $4 billion and $6 billion, well above the previous forecast range of $1 billion to $6 billion.

EBITDA for the first quarter dropped from $3.97 billion in the same period last year to $1.59 billion, but still surpassed analyst expectations of $1.46 billion. Since December last year, Maersk and its peers have chosen to bypass Africa to avoid risks to container vessels in the Red Sea, resulting in rising freight rates as voyages lengthen.

Vincent Clerc, CEO of Maersk, stated that this strategy not only supported the company's first-quarter performance recovery but also improved the outlook for the coming quarters. In an interview with the Financial Times, he noted that there are currently no signs that the tense situation in the Red Sea has eased and expects it to last at least until the second half of this year. Therefore, he is not optimistic about a return to the Red Sea-Suez Canal route in the near future.

However, Clerc also warned that despite the current strong market performance, the influx of new container vessels will lead to excess capacity pressures this year and next, which will adversely affect shipping companies' profits. He stated that spot freight rates, although tripled to nearly $3,500 per container at the beginning of the year, have since slowed their upward trend. Bernstein analysts predict that by 2024 to 2025, the number of container fleets will increase by 15%, leading to an oversupply of capacity.

Regarding the accident involving the collapse of the Baltimore Bridge by the vessel "Dali," Maersk's CEO Vincent Clerc stated at the company's quarterly earnings press conference that the US investigation is still ongoing, and Maersk does not expect to bear any economic responsibility for this incident. He emphasized that new facts may be revealed as the investigation progresses, but currently, no evidence has been found pointing to Maersk's responsibility.

Additionally, Maersk mentioned that shipowner Grace Ocean has declared general average, meaning that all cargo on board the vessel "Dali" has been detained as part of the legal procedure for distributing accident costs. Based on the current situation, compensation for the bridge collision incident is expected to be close to $4 billion, meaning that all relevant parties, including shipowners, operators, charterers, and consignees, will need to contribute to paying the costs associated with the accident.

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