Cargo carried through the Suez Canal rose 4.1 percent to an eight-month high in April, signaling no weakness in world trade and the third-highest profit ever for A.P. Moeller-Maersk A/S, the biggest container-shipping line.
The Egyptian waterway carries about 8 percent of global goods and handled almost 57.8 million metric tons last month, compared with 55.6 million tons in March, data from the Suez Canal Authority show. Rising European demand for Asian products is shoring up container rates threatened by what Clarkson Plc, the biggest shipbroker, estimates will be a 6.8 percent expansion in the fleet’s capacity this year.
Commodities fell the most since 2008 last week and stocks also retreated after economic data from the U.S. to Germany raised investors’ concern that the recovery is slowing and demand will weaken. More cargo through Suez suggests no such slowdown because the shipments have a 90 percent correlation to global trade, according to Geopolicity, an economic consultant. Container rates assessed by the Hamburg Shipbrokers’ Association almost doubled since the start of 2009.
“This growth in trade is what Maersk and other owners are targeting, and the Suez Canal data show they are spot on in their reading of where demand is going to come from,” said Fred Doll, the managing director of Forest Row, England-based Doll Shipping Consultancy and previously a director at Clarkson. “I look at the data as an accurate barometer of world trade.”
The Suez Canal, which opened in 1869, handled an average of 54.5 million tons of cargo a month in the first four months of 2011, 7.3 percent more than a year earlier, according to data from the waterway’s authority. The growth indicates that violence which toppled President Hosni Mubarak in February didn’t interrupt trade.
Container vessels account for about 55 percent of traffic, data from the Suez Canal Authority show. Liquefied-natural-gas carriers make up another 15 percent, oil tankers 12 percent, dry bulk shipping 7.6 percent and car transporters 6.3 percent. About 90 percent of global trade moves by sea, according to the Round Table of International Shipping Associations.
Shipments between Asia and Europe made up 38 percent of business for Copenhagen-based Maersk’s container-shipping fleet last year, said Michael Storgaard, a spokesman for the company. It sent about 2,000 vessels through the canal in 2010.
Maersk, which also operates oil and gas tankers and shipping terminals, will report net income of 23.4 billion kroner ($4.53 billion) this year, the mean of 17 analysts’ estimates compiled by Bloomberg show. That will be the third-highest ever, after last year’s record 26.5 billion kroner and 24.4 billion kroner in 2004, according to company data.
The 6.8 percent growth forecast for the container fleet’s capacity compares with an anticipated gain of 9.7 percent in cargo volumes, estimates from London-based Clarkson show. That helps explain why analysts covering Maersk are more bullish now than a year ago, when they were predicting 2011 net income of about 14 billion kroner, data compiled by Bloomberg show.
Maersk will make an average of $1,394 per 20-foot box it loads onto its ships this year, compared with $1,532 in 2010, according to Finn Bjarke Petersen, an analyst at Nordea Markets in Copenhagen who has a “buy” rating on the stock. Petersen’s share recommendations returned 65 percent in two years, according to data compiled by Bloomberg.
Shares of Maersk rose as much as 5.3 percent today, the most since September, after first-quarter net income jumped 85 percent to 6.35 billion kroner, exceeding analysts’ estimates. They closed 4.4 percent higher in Copenhagen and 21 of 25 analysts covering Maersk rate it a “buy” or “hold.” The stock trades at 10 times estimated earnings, down from about 18 times a year ago, data compiled by Bloomberg show.
“We are quite confident that rates will go up,” Chief Executive Officer Nils Andersen said in an interview with Francine Lacqua on Bloomberg Television’s “On The Move.”
The container industry contrasts with companies focusing on oil, coal and iron ore. Returns for supertankers on the benchmark Saudi Arabia-to-Japan route dropped 84 percent this year while rates for capesizes hauling dry bulk commodities fell 68 percent, data from the Baltic Exchange show. The London-based bourse publishes daily rates for more than 50 maritime routes.
Both markets plunged because of vessel gluts. The oil-tanker fleet will expand 7 percent this year, more than double the 2.9 percent expansion in trade, Clarkson estimates. Carrying capacity in dry bulk will rise 13 percent, compared with a 5 percent gain in trade, the broker is forecasting.
Dry Bulk Rates
Oil tanker and dry bulk rates are more volatile than those for containers. The Hamburg Shipbrokers’ Association’s container index moved 11 percent or more in six of the last 10 quarters. Supertanker returns have risen or fallen 20 percent or more in all except one of the last 10 quarters, while for capesizes the figure is 21 percent.
The International Monetary Fund raised last month its forecast for growth in world trade in goods and services this year by 0.3 percentage point to 7.4 percent.
The canal, extending about 120 miles (190 kilometers) from Port Said to the Gulf of Suez, cuts the journey from Singapore to Rotterdam, Europe’s largest port, by about 29 percent, according to data on the Suez Canal Authority’s website. That cuts costs because the biggest container ships burn about $65,000 of fuel a day, data compiled by Bloomberg show.
Combined with the Sumed pipeline that runs adjacent to the canal, Egypt can handle as much as 4.5 million barrels of oil a day, enough to supply Japan, according to Goldman Sachs Group Inc. Countries including Saudi Arabia use the pipeline because the waterway generally isn’t big enough to be used by laden supertankers. Ships take cargoes from the Persian Gulf to Suez, with different vessels picking them up in the Mediterranean.
Growth of traffic through the Suez Canal is also critical for Egypt because it is the country’s fourth-biggest source of revenue, behind tourism, foreign direct investment and remittances from expatriate workers. The waterway, which was nationalized in 1956, generated about $4.8 billion of tolls last year, data from the canal authority show.
The cost of credit default swaps used to insure against Egypt defaulting on its debt rose 51 percent this year and the EGX 30 Index of equities slumped 31 percent.
While analysts also track trade by collating port data, the canal has the advantage of capturing almost all consignments in one place, said Rikard Vabo, an Oslo-based analyst at Fearnley Fonds AS, an investment bank. His recommendations on the shares of shipping companies returned 21 percent in two years, data compiled by Bloomberg show.
“This confirms what we’ve been seeing from ports, which is that demand is still good,” he said. “The correlation between cargo volumes from Asia to Europe and figures reported through the Suez Canal is almost one to one.”