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At the end? Maersk's warning container market returns to 'normal'

At the end? Maersk's warning container market returns to 'normal'

Lucas Sunny Worldwide Logistics 2022-04-27 16:45:26

Although Maersk beat expectations in the first quarter, the shipping giant warned that the global shipping industry could gradually return to normal in the second half of the year. On April 26, Maersk announced its financial results for the first quarter of 2022, reporting revenue of $19.3 billion, underlying EBITDA of $9.2 billion and underlying EBIT of $7.9 billion. "The first quarter exceeded expectations," Maersk said, adding that the results were driven by continued abnormal conditions in the seaborne market, with volumes down 7 per cent and rates up 71 per cent compared with the first quarter of 2021. Maersk said: "The strong performance was due to exceptional market conditions within the concourse market, where volumes declined by 7 per cent compared to the first quarter of 2021, while freight rates increased by 71 per cent on average." Given the strong first-quarter results, Maersk expects current market conditions to continue in the second quarter and raised its full-year 2022 forecast. Maersk raised its full-year earnings forecast sharply again, as it did last year, forecasting full-year real earnings before interest, tax, depreciation and amortisation of $30bn in 2022, up 25 per cent from a previous estimate of $24bn. Actual EBIT of $24 billion (vs. $19 billion previously expected) and free cash flow of over $19 billion (vs. approximately $15 billion previously expected). Detlef Trefzger, Maersk chief executive, said in a statement: "The already tight supply chain situation worsened in the first quarter as the Conflict between Russia and Ukraine added to uncertainty." "We expect current market conditions to continue in the second quarter and, combined with higher contract freight rates, we expect a stronger full-year 2022 result than previously anticipated." Note that unlike last year, the shipping giant also warned that container volumes could actually fall this year, and that the russia-Ukraine conflict and high inflation could adversely affect the global economy. Current guidance is still based on the assumption that seaborne operations return to normal in the second half of 2022. Despite continuing to be bullish on the containerships market this year, Maersk also expressed concern about global container demand based on the drop in first-quarter volumes, cutting its outlook for global container demand growth to -1/+1% from 2-4%. The shipping industry has posted record profits in recent quarters as prices continue to surge as consumer demand surges, major ports around the world are clogged by COVID-19 and airspace is closed following the recent conflict between Russia and Ukraine. There are currently 861 container ships on order, with a total capacity of 6.57m TEU, or 26.4 per cent of the existing fleet, according to Klaxon. Shipping giants are also about to start delivering new ships they ordered in large numbers last year, data show. This means that high rates in the container shipping market will be difficult to sustain.