Hedge funds speculate against Maersk

AP Moller-Maersk finds an unusual posture this year, as the world’s largest shipping company is caught in an attack by the hedge fund. Generally, Maersk has not been subject to much speculation against it, only in September 2018, short positions represented only 0.8% of the company’s shares. However, trade wars, fuel prices, overcapacity containers strongly affect the projections of the global shipping industry causes investors to review their options.

Short positions to the giant Danes Maersk have increased considerably to 6% of the share capital of the year, the highest level recorded since 2006 mentioned by Bloomberg according to data provided by IHS Markit.

The international trade context is not the best; A growing trade war is looming. USA prepares to impose tariffs on China 500 billion dollars, which corresponds approximately to the value of all imports from China to America. David Kerstens, an analyst at Jefferies, assures Bloomberg that “There is clearly a risk that the situation will intensify and have a greater impact on trans-Pacific trade flows.”

For Maersk being the largest container line transporting goods worth $ 4 billion a year, this protectionism is alarming. Currently, Maersk has already lost more than 20% of its market value this year, as investors try to digest the changing landscape. In addition to this, the containerized lines continue to try to stay afloat with the overcapacity that flooded the global fleet during the last decade, now they have to face the coming commercial war.

For Maersk, the main trade route is between Asia and Europe, with less exposure to direct trade between China and the US. UU However, the consequences of a trade war between these two countries in their business have been limited for the time being.

However, “if the situation increases further and affects other routes, including the transatlantic trade,” Kerstens said.

AQR Capital Management located in the US, is one of the funds that speculates against taking into account a regulatory transfer of July 18 where it shows that the firm has a short position equivalent to 0.5% of the share capital of Maersk ( the Danish regulator does not identify funds with positions smaller than that).

“The consequences of tariffs on container transport are likely to be alarming,” said Rahul Kapoor, senior analyst at Bloomberg Intelligence. “We believe that the best of the growth of trade is already lagging behind and carriers will have to reduce capacity at an accelerated pace to halt decreases in shipping freight if they have any chance of making profits in the third quarter.”

Meanwhile, Maersk is in the second year of a historic transformation with the objective of having a business that focuses on transportation and does not have energy assets. But the market “does not attribute much value to the transformation at this time” since the stock game is “much more a macro game,” according to Kerstens.

At the same time, there is concern that Maersk may have difficulty achieving its EBITDA forecast for the full year, from $ 4bn to $ 5bn, due to rising costs. The average estimate in a Bloomberg survey of 12 analysts suggests that Maersk will only reach $ 3.68bn this year. Just four weeks ago, the average calculation pointed to an EBITDA of $ 4.16bn.

“Fuel costs have increased more than 20% so far this year, which negatively affects profitability, since freight rates are 4% lower so far this year,” Kerstens said. On the positive side, there are signs that the overcapacity of the container fleet is easing as fewer new ships enter the market, he says. “That’s the argument for the case,” he said. Maersk, who publishes the results of the second quarter on August 17, in addition to that, did not want to comment. Already in May, the company said “greater uncertainties due to geopolitical risks, commercial tensions and other factors” may affect its ability to meet its projection at the end of the year.