Cape of Good Profits: Maersk Sees Red Sea Chaos and Soaring Demand Pushing Earnings Even Higher

A.P. Moller – Maersk A/S (Maersk) has raised its full-year financial guidance for 2024, marking the fourth upward revision this year as strong demand and ongoing disruptions in the Red Sea continue to impact global shipping.

In a trading update released Monday, Maersk revealed impressive preliminary results for the third quarter of 2024, reporting revenue of $15.8 billion, an underlying EBITDA of $4.8 billion, and underlying EBIT of $3.3 billion.

With these strong Q3 results, Maersk has once again upgraded its financial outlook for the year. The company now anticipates an underlying EBITDA of $11.0–$11.5 billion and an underlying EBIT of $5.2–$5.7 billion for 2024, representing a significant increase from its previous guidance of $9–$11 billion EBITDA and $3–$5 billion EBIT. Additionally, Maersk has raised its free cash flow forecast, which is now expected to surpass $3 billion.

The shipping giant attributed the significant upgrade to a combination of strong container market demand and the prolonged instability in the Red Sea, primarily due to Houthi-led attacks on vessels in the region.

The revised global container market volume growth forecast for 2024 is pegged at around 6%, an increase from the previous estimate of 4-6%.

The full Q3 interim results will be published on October 31, 2024.

A Year of Constant Upgrades

This is the latest in a series of upward revisions by Maersk, which had initially forecasted a much more conservative outlook for 2024. Back in February, the company anticipated an underlying EBITDA of between $1 and $6 billion due to concerns over global container overcapacity and the assumption that the disruptions in the Red Sea would not have a long-term impact on freight rates.

However, the evolution of Maersk’s financial outlook has been staggering, with multiple upgrades this year alone.

Red Sea Disruptions Continue

The shipping industry has been particularly affected by the ongoing conflict in the Red Sea, where Houthi attacks on shipping lanes show no signs of easing.
In response the ongoing conflict, Maersk and its upcoming Gemini Cooperation partner, Hapag-Lloyd, have confirmed that ships in the alliance will continue to navigate via the Cape of Good Hope, rather than the traditional Suez Canal route, upon commencing operations on February 1, 2025.

The Gemini Cooperation will implement a novel “hub and spoke” strategy, incorporating mainliner hubs and transshipment spoke services across seven trade lanes, delivering 57 services aimed at achieving 90% service reliability—a substantial improvement over the current global industry average of 53%.

Long-Term Impact of Red Sea Crisis

The Red Sea crisis, triggered by Iranian-backed Houthi militants as part of their broader regional strategy, is now entering its second year with no end in sight.
As Maersk and its partners adapt their operational strategies, the industry is closely monitoring geopolitical developments not only in the Red Sea, but also the Black Sea, Strait of Hormuz, Taiwan Strait, and South China Sea. The longer these disruptions persist, the more they will reshape global shipping routes and freight costs.