DANISH shipping giant, Maersk Line, is poised to reap the rewards of improving global trade conditions especially if early signs of a recovery in demand on the key Asia-Europe route prove to be true, according to a Drewry analyst.
Drewry equity research chief Rahul Kapoor said lower bunker costs and consumption, a continuous cost saving programme running since 2012 and the introduction of ships that burnt 15 per cent less fuel puts Maersk in a good position to make big money.
"We believe the magnitude of cost cutting over the last couple of years combined with increased volumes, which are higher than its peers, point to a very good year for Maersk," said Mr Kapoor.
Drewry Maritime Equity Research analysis found that unexpectedly high trade growth of 2Q14 from Asia to Northern Europe had continued into the early 3Q14 peak season, with 90 per cent utilisation.
Maersk Line, with around 15 per cent of global container capacity, would be "the key beneficiary" among shipping lines if global trade volume gains maintained momentum and freight rates recovered, reported Lloyd's Loading List.
"Maersk Line's key trade lane of Asia-Europe is already showing early signs of renewed growth with year-to-date volumes up a significant eight per cent, surpassing our expectations," said Mr Kapoor.
"In the freight rates front, even as 2014 contracts were signed for weaker rates, spot rates have shown a positive trend with significantly higher yearly averages." he said.
"We expect higher volume growth and a decline in freight rate volatility to provide continued earnings visibility for Maersk Line in the next few years as the container shipping demand-supply balance returns to equilibrium," he said.
Last month, Maersk Line surprised investors with a profit of $547 million, compared to profits of $439 million and $454 million in 2Q13 and 1Q14 respectively, During the period liftings were up 8.9 per cent year-on-year and freight rates rose 0.6 per cent.
Source : HKSG.