The development of the hotly-debated P3 alliance will have a crucial effect on the A.P. Moeller-Maersk B share in 2014, two analysts tell ShippingWatch.
Shipping analyst at Alm. Brand Markets, Jesper Christensen, explains that particularly the developments in Maersk Line and the approval or rejection of the P3 alliance could impact the price of the Maersk share in 2014.
"The market situation is pretty much the same - that is, it's very weak. If you look at Maersk Line in this tough 2014 market, the price of the share will be dictated by the P3 alliance. Will it be approved, and on what conditions, and what will it mean for the Maersk Line operations? They've announced that the alliance will bring further cost reductions, but how soon will we see those reductions? So the alliance is definitely the major joker here," says Jesper Christensen.
The US maritime authority FMC, the Federal Maritime Commission, will meet with the competition authorities from China and the EU on Tuesday, December 17th, to discuss the alliance. Global regulation will be part of the agenda, while carrier alliances, vessel sharing agreements, and the effects of operational agreements on global trade are among the topics that will also be debated on the summit.
Why shippers are worried about P3
"We look forward to exchanging opinions with our colleagues. The shipping industry is dynamic, as is apparent from the changing nature of these agreements. The effect of these trends will have a global impact, which requires an international understanding of the changing nature of our business," said FMC Chairman Mario Cordero when the summit was announced.
All our estimates should be increased
Frode Mørkedal, analysts at RS Platou Markets, also estimates that an approval of the P3 alliance would have a significant impact on the share - he is just not convinced that the effect will be felt in 2014.
"Neither we nor the consensus of the market have based our estimates (of the share development) on an approval of the P3 alliance. So if the alliance is approved all our estimates will have to be increased. We expect that P3 will reduce the costs by eight percent, which corresponds to around USD 461 per share. Maersk says that even if the P3 alliance is approved and launched in March 2014 , the effect won't be felt before late 2014, as it'll take some time to implement P3. So the effect of the 8 percent won't be felt before 2015," says Frode Mørkedal.
He expects that Maersk Line will be able to reduce unit costs regardless of whether the P3 alliance is approved or not. But in that case, the reduction to unit costs will only be three percent. This will be the result of the Triple-E ships, which will increase the fleet's overall efficiency, as well as the fact that Maersk Line has a high number of time-charter vessels that can be returned during the next two years, which will also result in reduced unit costs.
"P3 is important because it will have such a noticeable effect on profits if approved. The share will have to be increased significantly. But you might as well say that the share will do well by itself, without P3. But if P3 comes through it'll bring a considerable upside."
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