Maersk sees signs of further port congestion in Asia and Middle East, more increases in freight rates

Bengaluru - Danish shipping group A.P. Moller-Maersk, viewed as a barometer of world trade, said it now sees signs of further port congestion, especially in Asia and the Middle East, and additional increase in container freight rates.

The rise in container freight prices and further port congestion are expected to contribute to a stronger financial performance in the second half of 2024, Maersk said on June 3.

The company raised its full-year profit guidance for the second time in a month on the back of strong container market demand and the crisis in the Red Sea. Maersk now expects its underlying earnings before interest, tax, depreciation and amortisation in the range of US$7 billion (S$9.4 billion) to US$9 billion, up from its previous forecast of US$4 billion to US$6 billion.

Maersk had raised its full-year profit guidance in May when it reported first-quarter earnings, citing strong demand and higher freight rates as ships sailed longer to avoid conflict in the Red Sea.

Earlier on June 3, the company said that it was facing significant terminal congestion in Mediterranean and Asian ports, causing substantial delays in its vessel schedule.

Port congestion in China and other Asian countries is pressuring an overstretched container shipping market that is already reeling from shortages in vessel space and equipment, analytics provider Linerlytica said in a recent report.

Singapore, the world’s second-busiest container port, is now experiencing severe delays. Some ships are skipping calls there, upending schedules at downstream ports, Linerlytica said.

Empty containers also are piling up in Sri Lanka and the United Arab Emirates, while China and Singapore are reporting shortages, said Mr Koray Kose, chief industry officer at Everstream Analytics.

“We’re sailing into the storm,” Mr Kose said.

The container industry’s woes trace back to December, when Maersk, Hapag-Lloyd and other shipping lines diverted vessels away from the Red Sea and Suez Canal to avoid Houthi drone and missile attacks from Yemen.

Ships on the China-to-Europe and China-to-US East Coast lanes are instead sailing around Africa, cascading disruptions and higher costs across supply chains that rely on ocean vessels that transport about 80 per cent of international trade volume.

On May 31, the spot rate to send a 12m container from China to North Europe was US$4,615, almost 3½ times higher than on May 1, but below the all-time high of US$14,407 in January 2022, according to pricing platform Xeneta. That rate excludes US$10,000 “diamond-tier” rates for priority shipments.

The China-to-US East Coast spot rate was US$6,061, up from US$2,772 on May 1. It hit a record high of US$11,900 in January 2022.

Pricing experts said spot rates would keep rising as retailers such as Walmart and Target stock up for the back-to-school, Thanksgiving and Christmas holidays, and as manufacturers and importers rush in goods to avoid possible tariff hikes.

“In the near term, we will see a significant crunch in the form of very elevated rates and additional delays,” said Freightos head of research Judah Levine. REUTERS