Maersk expects sustained profit despite not using the Suez route

Maersk anticipates sustained strong demand for global shipping in the near future, although it plans to avoid using the Suez Canal until at least 2025 due to security concerns linked to Red Sea attacks, Reuters reports.

The company’s decision follows repeated assaults on vessels by Houthi militants, which have significantly disrupted this essential trade route, forcing prolonged re-routing of shipments. “There are no signs of de-escalation and it is not safe for our vessels or personnel to go there … Our expectation at this point is that it will last well into 2025,” stated CEO Vincent Clerc.

The Suez Canal is a critical global trade route because it offers the fastest maritime passage between Europe and Asia, significantly reducing travel distance and time compared to the alternative route around the southern tip of Africa. By connecting the Mediterranean Sea to the Red Sea, the canal enables shipping vessels to bypass the lengthy journey around the Cape of Good Hope, saving roughly 7,000 kilometers.

According to UNCTAD, the Suez Canal is responsible for approximately 10 percent of global trade volume by tonnage. It handles an impressive 22 percent of all global container traffic, measured in twenty-foot equivalent units (TEU). In 2023, the top three commodities passing through the canal were cars and containers, each making up about 20 percent of the volume, followed by oil products at 15 percent, and crude oil at 10 percent.

According to Reuters, despite these challenges, Maersk reported strong third-quarter demand, especially fueled by exports from China and Southeast Asia, with stable volumes from Europe and North America.

“Management was bullish about the near future and highlighted good demand for container freight,” Sydbank analyst Mikkel Emil Jensen told Reuters. Some investors might also expect Maersk to resume its suspended share buyback programme even though the company said a decision had not yet been made, Jensen added. Maersk’s shares rose 6.4% by 1253 GMT.

Furthermore, Reuters informs that Clerc dismissed concerns that the upcoming U.S. election or potential trade tariffs would negatively impact the freight market.

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None of the candidates (in the U.S. election) has a view that we need to slow down economic activity … as long as the economy seems strong and consumption is strong there will be continued strong demand for container traffic,

… Vincent Clerc said.