maersk container ship

Analysts Predict Bullish Future for Maersk as US Imports Hit Multi-Year Highs

Total Views: 14
October 23, 2012

Edith Maersk, Image courtesy Maersk Line

(Bloomberg) — U.S. imports of containerized goods are the highest since before the recession as the economic recovery gains traction, boosting rates for A.P. Moeller-Maersk A/S and other shipping lines.

Imports of everything from car parts to furniture probably rose 7.9 percent to 4.75 million 40-foot steel boxes in the third quarter from a year earlier, according to PIERS-JOC, a Newark, New Jersey-based research company tracking port volumes. Shares of Maersk, which has the most vessels shipping Asian-made goods to the U.S., will rise 19 percent in 12 months, based on the average of 20 analyst estimates compiled by Bloomberg.

Builders started the most new homes in four years last month and Americans bought cars at the fastest pace since 2008, government data show. The biggest expansion in retail sales since 2010 is boosting consumer spending, accounting for about 70 percent of the economy, as President Barack Obama seeks a second term in elections Nov. 6. That contrasts with shipping, where the gains are being limited by a glut of capacity as owners contend with the biggest fleet in history.

“The imports are consistent with the macroeconomic picture in the U.S., and things just turned significantly better,” said Nigel Prentis, the head of research at HSBC Shipping Ltd., a London-based shipbroker and consultant. “As far as that translates into freight rates for box ships, that will depend on the supply side. There are an awful lot of ships.”

Annual Contracts

The cost of shipping a standard 40-foot box to the U.S. West Coast from China, the world’s busiest trade route, rose 48 percent to $2,510 this year, based on data from Clarkson Plc, the largest shipbroker. Container lines are seeking an $800 increase per box in annual contracts that typically start May 1, according to the Transpacific Stabilization Agreement, a group of 15 shipping companies.

Maersk, the largest container line by market value, will report a 44 percent gain in net income to 21.9 billion kroner ($3.8 billion) for this year, according to the mean of 18 analyst estimates. The Copenhagen-based company also owns oil tankers and drilling rigs, with container shipping generating 45 percent of revenue, data compiled by Bloomberg show. Its shares rose 6.5 percent to 40,400 kroner this year and are predicted to reach 48,060 kroner in 12 months.

The shipping line controls 9.6 percent of capacity sailing to North America from Asia, according to data from Alphaliner, an industry consultant. The next-largest operators are Geneva- based Mediterranean Shipping Co. and CMA GGM SA, located in Marseille, France. The ships are as long as 1,300 feet and can hold as many as 15,550 boxes.

Car Parts

The predicted third-quarter imports would be the most since the same period in 2007, with car parts and furniture leading the gains, according to JOC. New-home construction jumped 15 percent to an annual rate of 872,000 houses in September, the most since July 2008, the Commerce Department said Oct. 17. Sales of cars and light trucks reached an annualized 14.9 million vehicles in September, the most since March 2008, according to data compiled by Bloomberg.

The U.S. recovery still has “a long way to go,” Gene Sperling, head of the National Economic Council, said Oct. 16. While the unemployment rate of 7.8 percent is the lowest since Obama took office, it still exceeds the 10-year average by 1.1 percentage points. The Federal Reserve announced a third round of debt-buying on Sept. 13. It bought $2.3 trillion of debt in the first two rounds from December 2008 through June 2011.

Budget Office

Federal spending cuts and tax increases totaling more than $600 billion are scheduled to take effect in January unless the U.S. Congress acts. That could trigger a recession, the Congressional Budget Office said in an Aug. 22 report.

Slowing growth elsewhere in the world is curbing gains in demand for U.S. exports, according to JOC. Containerized exports will increase 1 percent to 2 percent this year, compared with 6.5 percent in 2011, according to Mario Moreno, a JOC economist. The 17-nation euro area will contract 0.5 percent this year, and China will expand 7.7 percent, the slowest pace since 1999, according to the median of as many as 100 economist estimates compiled by Bloomberg.

Costs to ship a 20-foot box to Europe from China slumped 43 percent to $1,074 since July, Clarkson data show. Maersk removed eight vessels from the route this month, citing weaker demand, bringing total capacity cuts this year to 21 percent.

World Trade

The International Monetary Fund cut its 2012 forecast for growth in world trade by 0.6 percentage point to 3.2 percent on Oct. 9, down from 5.8 percent last year. The global fleet of container ships will expand 7.5 percent this year, according to Clarkson. About 90 percent of world trade travels by sea, the Round Table of International Shipping Associations estimates.

The global container fleet expanded 32 percent since the end of 2008, when the ships earned 62 percent more than now, Clarkson data show. Outstanding orders at ship yards are equal to 21 percent of existing capacity, according to IHS Inc., an Englewood, Colorado-based research company.

The glut extends across the merchant fleet. The Baltic Dry Index, a measure of the cost of shipping coal and iron ore, fell 36 percent since the start of this year, according to the Baltic Exchange, whose data are used as benchmarks for about 75 percent of commodity cargoes. Earnings for the largest oil tankers plunged 60 percent to $12,625 a day, Clarkson data show.

U.S. industrial output rose 0.4 percent in September, beating economists’ forecasts, Federal Reserve data show. Retail sales climbed 1.1 percent in September after a 1.2 percent gain the prior month, the biggest back-to-back advance since 2010, according to the Commerce Department. Twelve of 13 categories improved, including car dealers and electronics stores.

National Poll

The strengthening indicators may help Obama in a campaign dominated by the economy. Opinion polls nationwide and in competitive states show a tight race. Forty-three percent of respondents in the Bloomberg National Poll of 1,007 adults conducted Sept. 21 to 24 named unemployment and jobs as the most important issue facing the country.

The economy will expand 2.1 percent this year, compared with 1.8 percent in 2011, according to the median of 90 estimates compiled by Bloomberg. Containerized imports may expand 4.5 percent to 17.66 million units this year, the most since 2007, Moreno of JOC estimates.

“We’ve seen quite good imports into the U.S. for some time now,” said Frode Moerkedal, an analyst at RS Platou Markets AS in Oslo, whose recommendations on the shares of shipping companies returned 7 percent in the past year. “If you look at rates to the U.S., they’ve been more resilient that for Asia to Europe. It’s definitely a bright spot.”

Back to Main