Maersk has raised its full-year profit guidance multiple times in 2024, most recently in June, citing strong demand, higher freight rates, and ongoing disruptions in the Red Sea. The company initially forecast underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of between $1 billion and $6 billion, which was first raised to between $4 billion and $6 billion in May. By early June, this was again upgraded to a range of $7 billion to $9 billion, and then further increased to $9 billion to $11 billion. This indicates a substantial improvement from early 2024 forecasts, which even projected a potential operating loss of up to $5 billion.
The primary drivers for these upward revisions are the persistent attacks by Houthi militants in the Red Sea, forcing vessels to reroute around Africa, leading to longer transit times and reduced shipping capacity. Maersk CEO Vincent Clerc noted that these diversions have created significant delays and capacity losses, with an estimated 15% to 20% capacity reduction on Asia-to-Europe routes in the second quarter. This has also led to a system-wide shortage of empty containers and increased port congestion, particularly in Asia and the Middle East, with waiting times extending in key ports like Singapore and Shanghai.
These disruptions have dramatically inflated spot freight rates. Drewry's World Container Index reported a 4% increase to $4,226 per 40-foot container by late May, representing a 215% surge since October 2023. Analysts, like Mikkel Emil Hansen of Sydbank, confirm that Maersk is benefiting from the Red Sea crisis, emphasizing that if a resolution were found, earnings would face severe pressure. Philip Damas, managing director at Drewry Supply Chain Advisors, interprets Maersk's upgraded guidance as an expectation that these disruptions will continue longer than initially anticipated.
Maersk also updated its free cash flow expectations, now projecting at least $1 billion for 2024, a significant improvement from previous negative forecasts, and upgraded its earnings before interest and tax (EBIT) to a range of $1 billion to $3 billion from a previous forecast of a loss of $2 billion to $0 billion. Although global container shipping capacity is expected to increase by 2-3% each quarter this year and next, outstripping demand, current disruptions make the ocean division more profitable. However, CEO Vincent Clerc acknowledges that container volumes are high compared to global GDP growth and anticipates a normalization of volumes at some point.
