A.P. Moeller-Maersk A/S fell in Copenhagen trading after Jefferies Group LLC said the world’s largest shipping line may report losses at the end of the year as proposed container freight rate increases fail.
Maersk’s B shares fell as much as 1.5 percent. The stock lost 1.3 percent to 41,680 kroner at 11:02 a.m. local time, with trading volume at 52 percent of the three-month daily average. The drop was deeper than a 0.7 percent decline in the Nasdaq OMX Copenhagen 20 index.
Container companies, including Copenhagen-based Maersk Line, have said they plan to raise rates next month in an effort to combat price declines caused by overcapacity. The Shanghai Containerized Freight Index, a measure of box rates out of China, has lost 12 percent since the start of January as industry efforts earlier this year to boost prices fail to yield results.
“Maersk Line could record losses in the second and fourth quarters of this year, with a brief rebound in the third quarter on the back of some industry-wide discipline, which usually doesn’t last,” Johnson Leung, an analyst with Jefferies in Hong Kong, said in a note today. “2014 could be a tougher year, in our view, because more container shipping capacity will come on line.”
Leung started coverage of Maersk’s B shares with an underperform recommendation and a price estimate of 30,000 kroner. The analyst recommends selling the stock in the next few months when the proposed price increases result in a temporary “blip in freight rates and share prices.”
The shipping line on May 17 repeated a forecast that profit this year will be higher than the $461 million reached in 2012 as it cuts costs.
Jefferies also said that parent A.P. Moeller-Maersk’s oil unit, which operates in maturing fields in the North Sea, will suffer from lower prices and a drop in reserves.
“Attempts at finding new reserves could be expensive,” Jefferies said. “We’re concerned that either a decline in Maersk Oil’s production in the long run or over-spending in capex could be hard to recover.”