Ocean carrier giants raise profit expectations on back of climbing freight rates

COPENHAGEN, Denmark – Three of the world’s largest ocean carriers have improved their outlooks for the rest of the year, with each expecting a stronger financial performance than initially thought. These increased outlooks come at a time when container rates are soaring across all ocean trade routes.

Maersk, the largest public ocean carrier in the world (and second largest overall), improved its outlook earlier this month.

“On the back of continued strong container market demand and the disruption caused by the ongoing crisis in the Red Sea, Maersk now also sees signs of further port congestions, especially in Asia and the Middle East, and additional increase in container freight rates,” the company wrote in a release. “This development is gradually building up and is expected to contribute to a stronger financial performance in the second half of 2024.”

Maersk now expects an underlying EBITDA of $7 billion to $9 billion (previously $4 billion to $6 billion), and free cash flow of at least $1 billion (previously estimated to be -$2 billion).

“In the past month, the container transport market has entered a new phase driven by the disruptions from the ongoing crisis in the Red Sea and the ripple effects on global supply chains,” said Vincent Clerc, CEO. “While demand for container transport remains strong, supply has been negatively impacted by missed sailings, longer routes, equipment shortages, and delays leading to increased congestion across several key ports in Asia and the Middle East. This demand and supply imbalance has had an immediate and profound impact on freight rates.

“After a stable first quarter, price increases gained momentum during April and May across many regions,” he added. “The ongoing threats to commercial vessels in the Red Sea and growing supply chain bottlenecks indicate that this situation won’t improve soon. More capacity than expected will be needed to resolve these issues and stabilize the global supply chain. This has led us to reassess the outlook for the remainder of the year and upgrade our financial guidance.”

Israeli carrier ZIM, the 10th largest container shipper in the world, increased its expectation for EBITDA significantly. It now predicts between $1.15 billion and $1.55 billion in EBITDA, up from $850 million to $1.45 million. In the first quarter, ZIM saw net income of $92 million, compared to a net loss of $58 million last year.

The company credited its “strategic transformation” for the performance, as well as a “significant improvement in global freight rates.”

“Looking ahead, we now expect freight rates to remain stronger for longer than initially anticipated due to a combination of continued pressure on supply and availability of equipment and a recent uptick in demand,” said Eli Glickman, CEO.

Germany’s Hapag-Lloyd, the world’s fifth largest ocean carrier, also improved its outlook for the year. Despite first quarter revenue falling from last year, the company called business conditions “positive” in a report.

It has already raised its expectations for EBITDA twice. In March, it raised it to EUR 2 billion to 3 billion (from 1 billion to 3 billion). In May, it raised it again to the range of EUR 2.2 billion to 3.3 billion.

As of last week, average spot rates sit at $5,117 per 40-foot container, per Drewry. Rates from Shanghai to Los Angeles sit at $6,441, while Shanghai to New York sits at $7,552. Furniture importers have indicated rates upwards of $7,000 to the West Coast and $9,000 to the East.

Rates do not appear to be falling anytime soon.

See also:

  • Port congestion – the other issue driving freight rates
  • A COVID redux? Furniture importers sound alarm on rising container rates

The post Ocean carrier giants raise profit expectations on back of climbing freight rates appeared first on Furniture Today.