Maersk Set to Lower Guidance on Shipping Rate Slump

By MarEx 2013-05-22 11:43:00

A.P. Moller-Maersk , owner of the world's biggest container shipping company, is likely to cut its full-year outlook due to a further slump in container freight rates, analysts said on Wednesday.

Freight container rates have fallen 41 percent since the end of the first quarter, from $1140 per 20 foot container to $668, according to the Shanghai Shipping Exchange. Prices have been hurt by a weakening global economy and by a glut of freighters built ahead of the 2008 financial crisis.

The Danish company's Maersk Line said it will more than double its rate from the current level of $668 per 20 foot container on its main Asia to Europe route, although analysts doubt Maersk will manage to persuade customers to agree to the full hike.

Shipping companies seldom manage to get all of an announced rate hike since the eventual price paid is down to negotiations between freight forwarders, customers and shipping companies.

"If they do not succeed we are expecting a downgrade of the full-year outlook in connection with the second-quarter earnings report," Alm. Brand Markets equity analyst Jesper Christensen said.

Maersk Line, whose vessels make up around 15 percent of world container shipping capacity, is due to report second-quarter earnings in August.

The company was not immediately available to comment on whether it would lower its guidance.

Last week the group reported a better-than-expected quarterly profit and reiterated its outlook for Maersk Line to report a 2013 result exceeding that of 2012.

Christensen estimated that break even on the Asia to Europe route is between $1000 and $1200 per 20 foot container.

"If current container freight rates stay on this level for the rest of this year, there is no doubt they will have trouble reaching the full-year guidance," Nykredit Markets equity analyst Ricky Rasmussen said.

Several shipping companies, such as Hapag-Lloyd and China's Coscon Container Lines, have announced rate hikes of up to $1000 to cut their losses.

Reporting by Ole Mikkelsen; Editing by Louise Heavens (C) Reuters 2013.