Geoffrey Smith 

Investing.com — A.P. Moller – Maersk (CSE:) stock rose on Tuesday as the Danish shipping giant raised its full-year guidance after a blowout first quarter for its container shipping unit.

Maersk raised its year-end free cash flow guidance by an incredible $4 billion. This was in response to the expectation that freight rates would remain tight until the end of the year. On expectations that the unusual conditions created by pandemics would disappear, the stock was down 5.4% at 5:45AM ET (0945 GMT).

Maersk stated that it sees free cash flow this year of $19 billion, an increase from the earlier projection of $15 billion. The adjusted earnings before interest taxes, taxes and amortization (AEI) will now be $30 billion, rather than $24 billion as originally forecast.

Maersk issued its new guidance along with preliminary figures for the first quarter which were well ahead of its expectations due to what it called “the continuation of the exceptional market situation within Ocean,” its core shipping business.

The company noted that 71% of freight rates for the second quarter had been increased by this division compared with the same period last year. Volumes fell 7% due to the reduction of income subsidies for households related to pandemics in the U.S.A and Europe.

It now sees a lower demand for containers in the entire year due to the price rise. Maersk predicts that global container demand will remain flat, compared to its earlier forecast of a growth rate of around 3%. 

According to the Danish company, it expects that the seaborne commerce business will resume normalization in the second quarter. However, that will depend in large measure on China’s ability to master the current wave of Omicron-variant COVID-19. A month-long lockdown of Shanghai has led to increased congestion at China’s largest port, although the consultancy Four Kites noted that shippers have been able to mitigate that effect by using other ports such as Ningbo.