Overcapacity Trumps Rate Hike Plan, Maersk Shares Fall

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March 22, 2013

maersk(Bloomberg) — A.P. Moeller-Maersk A/S, the world’s largest container line, fell the most in four days in Copenhagen as freight rates out of China declined, suggesting the industry is failing in a joint effort to boost prices.

Maersk’s B shares fell as much as 1.4 percent, the most since March 18. The stock lost 0.9 percent to 46,240 kroner at 11:04 a.m. local time, with trading volume at 40 percent of the three-month daily average. The drop was deeper than a 0.4 percent decline in the Nasdaq OMX Copenhagen 20 index.

Container companies, including Copenhagen-based Maersk Line, have said they plan to raise rates this month and next in an effort to combat price declines caused by overcapacity. The Shanghai Containerized Freight Index, a measure of box rates out of China, fell 4.7 percent today, the most since November.

“The proposed rate increases are turning out to be a failure as there’s too much overcapacity,” Jesper Christensen, an analyst with Alm. Brand A/S in Copenhagen, said by phone. “This isn’t good for Maersk as today’s data show that last week’s gain — to a large extent — is disappearing already.”

The index, which jumped 13 percent last week, has lost 23 percent from a May 4 peak last year.

Maersk Line cut capacity on the Asia/Europe route — its biggest — by about 21 percent last year amid a slowdown in demand. The shipping line said Feb. 22 that profit this year will be higher than the $461 million reached in 2012 as the company cuts costs and as growth in global container demand accelerates.

Mounting concern over the bailout for Cyprus is also hurting Maersk shares, said Christensen, who has a sell recommendation.

“Maersk has to some extent become a risk on/risk off share that moves with macro trends,” the analyst said. “So when stock markets decline, Maersk often declines more, and when markets rise, Maersk rises more.”

– Christian Wienberg, Copyright 2013 Bloomberg.

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