[photopress:Neptune_Orient_Lines.jpg,full,alignright]Shares in Asian shipping companies are starting to stagnate because of concerns that rising costs could hurt earnings.
China Cosco Holdings, owner of the largest Asian container line, has seen its shares fall 25% this month from a record high July 31.
Neptune Orient Lines, which operates the region’s fourth-largest container line, has dropped 34% since peaking last month. Its costs will rise 1% in the second half, twice as fast as in the first, as fuel prices rise.
Alex Chang, an analyst with UBS in Hong Kong is not optiministic. Energy costs have jumped more than 30% this year and surcharges to move containers in and out of ports are rising, undermining shipping lines’ efforts to stem two years of profit declines. The companies are also paying more for vessels as shipbuilders charge higher prices because, paradoxically, of a flood of orders. Orders are made long before any market variations can be intelligently predict.
The 20 biggest Asian container shipping lines by market capitalization are valued, on average, at 30 times earnings. That exceeds the average multiple of 21 for the Bloomberg World Transportation index of 108 companies.
The price of ship fuel climbed to a record high last month after crude oil reached the highest level in more than 11 months. The prices are increasing largely because of demand from China. According to Mirae Asset Securities in Seoul bunker fuel costs make up as much as 15% of a shipping line’s total expenses.
Source: International Herald Tribune