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Maersk expects tailwind to last amid high demand for containers

Reuters

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Maersk expects tailwind to last amid high demand for containers

CARGO. The Maersk Line container ship Maersk Batam sails in the Bosphorus, on its way to the Mediterranean Sea, in Istanbul, Turkey, August 10, 2018.

File photo by Murad Sezer/Reuters

Maersk says there aren't enough ships available in the world to meet a surge in consumer demand, resulting in record-high freight rates

Denmark’s Maersk said on Wednesday, May 5, it expected its “exceptionally strong” performance in the 1st quarter to continue for the rest of the year, driven by high demand for shipping containers from China to the United States.

Maersk, which handles about 1 in 5 containers shipped worldwide, said there were not enough ships available in the world to meet a surge in consumer demand, resulting in record-high freight rates.

The firm’s shares traded 4% higher at 0921 GMT, near a record high reached last week.

“The situation today is that our customers are trying to meet a very, very high underlying demand, while at the same time rebuilding stock,” chief executive Soren Skou told a media call.

Large retailers and producers, including Puma and Signify, have said congestion at ports, container shortages, and delays at the Suez Canal were causing problems in shipping products made in Asia to key markets.

Imports into North American from Asia rose 40% in the first 3 months of the year. Container ships are now waiting 16 days outside the port in Los Angeles to unload, Skou said.

“This is a huge problem for our customers,” the CEO said. “It’s a mess and it will take some time to clear.”

The company set money aside to buy more containers but had no plans to order more ships, he said.

Skou said he expected bottlenecks in the Suez Canal, where Maersk at one point had 50 container ships waiting to pass, to be cleared by next month.

Maersk last week raised its outlook for full-year underlying earnings before interest, tax, depreciation, and amortization (EBITDA) to $13 billion-$15 billion from $8.5 billion-$10.5 billion.

It lifted its forecast for global container demand growth to 5%-7% from 3%-5%. Container demand contracted 1.8% last year.

“We now expect the current dynamics to last into the 4th quarter,” Skou said.

Maersk confirmed on Wednesday the 30% rise in 1st quarter revenue announced in a preliminary trading statement last week and reiterated its upbeat profit outlook for 2021.

The company said EBITDA more than doubled in the period to $4 billion, in line with preliminary numbers.

Maersk said high free cash flow had prompted it to speed up an existing $1.6-billion share buyback program and launch a new $5-billion share buyback program that will conclude in 2023. – Rappler.com

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