AP Møller-Maersk, the world’s second-largest container shipping company, has once again raised its financial outlook for the year, driven by ongoing supply chain disruptions in the Red Sea and robust global trade activity. This marks the third upward revision since May, highlighting the persistent volatility in global shipping markets.
On Thursday, Maersk announced it now anticipates underlying operating profits for the full year to be between $3 billion and $5 billion, a significant increase from its previous forecast of $1 billion to $3 billion issued in June. This is a stark turnaround from February, when the company had projected a potential loss of up to $5 billion.
The Danish shipping giant’s latest forecast revision comes on the back of deepening delays and congestion within global supply chains, which have propelled freight rates to new heights. The company now expects container growth, a key indicator of global trade health, to rise by 4-6 percent this year, an increase from an earlier projection of 2.5-4.5 percent.
The disruptions began when Houthi rebels initiated attacks in the Red Sea late last year, forcing container ships to navigate a longer and more expensive route around the southern tip of Africa for journeys between Asia and Europe. Initially, Maersk believed these disruptions would be temporary, lasting only a few months. However, the company now expects the impact to persist throughout most of this year and potentially extend into 2025.
Increased Profits Expected as Global Trade Strengthens
Vincent Clerc, Maersk’s CEO, expressed concerns in June to the Financial Times about the potential exacerbation of these disruptions by retailers pushing their orders earlier, fearing delays in Christmas merchandise. The third quarter typically sees the highest volume of Christmas product shipments for container lines, adding pressure to an already strained system.
Despite the ongoing challenges, Maersk provided limited new insights into the duration of the Red Sea disruptions in its recent update. Initially, the company had anticipated that a surge in new ships ordered by competitors would skew the supply-demand balance, negatively impacting profitability in the latter half of the year. However, the company remains cautious, noting that “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.”
In its latest trading update, Maersk reported a 2 percent decline in revenues to $12.8 billion for the second quarter, while operating profits dropped by 40 percent to $963 million. The company also noted the potential for further disruptions later this year, especially if political developments, such as a possible return of Donald Trump to the U.S. presidency, lead to new trade tariffs on China. This scenario could prompt shippers to accelerate goods movement in anticipation of these tariffs.
The recent softening of short-term container shipping rates may suggest some easing of the pressure from early Christmas orders. However, the broader outlook remains uncertain. Shares in Maersk initially rose following the revised guidance but were down 0.5 percent by Thursday afternoon.
Maersk’s ongoing adjustments to its financial guidance reflect the dynamic nature of global shipping markets, influenced by geopolitical events, economic policies, and shifting trade patterns. The company’s ability to navigate these challenges will be crucial as it seeks to maintain its leadership position in the container shipping industry.
