Maersk warns oversupply to hit profits and plays down Red Sea boost

Reuters :
Maersk (MAERSKb.CO) warned on Thursday that container shipping overcapacity would hit profits more than expected this year and that it didn’t see a major boost from the jump in freight rates due to Red Sea disruptions, hammering its shares.

The warning, which also led the Danish shipping giant to suspend its share buyback programme, is in stark contrast with investors’ recent optimism about the sector.

Container shippers have been among the best-performing stocks in Europe this year as the re-routing of vessels following attacks on shipping by Houthi militants in the Red Sea – a major trade route – has boosted freight rates.

Maersk, like other shippers, has been diverting vessels on a longer route around Africa, and some analysts had expected extended journey times and higher freight rates would outweigh a big increase in new container ships joining the market.

However, Maersk CEO Vincent Clerc told reporters that the Red Sea crisis did not match the scale of disruption caused by the pandemic, when freight rates and shippers’ profits were bolstered by multiple shocks, including lockdowns, changing consumer behaviour and bottlenecks.

“In this case, it’s only a longer transit time,” he said. “The moment we start sailing via the Suez Canal again, prices will fall immediately.”

Maersk, viewed as a barometer of world trade, said one-third of its container volumes were impacted by Red Sea disruptions.

TOO MANY SHIPS

The pandemic boost to shipping profits resulted in a wave of new ship orders.

Vessels delivered at the end of last year were used to cover the gaps created by longer sailing around Africa, but the overcapacity will only fully materialise during 2024, and be felt in 2025 and possibly into 2026, Clerc said.