Rising Freight Rates Drive Profit Surge
Danish shipping giant Maersk announced on Thursday that it has raised its 2024 profit forecast by $2 billion. This adjustment comes as freight rates soar due to the ongoing crisis in the Red Sea, significantly impacting global trade routes.
Red Sea Crisis Forces Shipping Detours
The crisis in the Red Sea, exacerbated by months of attacks from Yemen’s Iran-backed Huthis, has led some shipping companies to reroute around southern Africa. This detour affects a vital passage that usually handles about 12 percent of global trade, contributing to increased freight rates.
Upgraded Profit Expectations
In response to the supply chain disruptions in the Red Sea and strong container market demand, Maersk has upgraded its full-year guidance for 2024. The company now anticipates an operating profit (EBITDA) between $9 and $11 billion, up from the previously forecasted $7 to $9 billion.
Volatile Trading Conditions
Maersk cautioned that trading conditions remain highly volatile due to the unpredictable situation in the Red Sea and uncertainties in supply and demand. Despite these challenges, the company projects robust performance, with preliminary figures indicating second-quarter revenue of $12.8 billion and an EBITDA of $2.1 billion.
Conflict’s Broader Impact
The Yemeni Huthis have been targeting Red Sea shipping with drones and missiles since last November, claiming solidarity with Palestinians during the Gaza war. A deadly drone strike on Tel Aviv in July led to Israeli airstrikes on Yemen’s port of Hodeida, causing significant casualties and a massive fire, further complicating the shipping landscape.
SOURCE: Ref Image from Financial Times
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