Fearnley Securities has downgraded shares of AP Moller-Maersk as it sounded a note of caution for container lines riding a strong rebound from lockdown lows earlier this year.
The Norwegian investment bank see challenges ahead, despite booming rates and improved volumes.
Fearnley said freight rate expectations based on the Shanghai Shipping Exchange's Shanghai Container Freight Index (SCFI) and China Container Freight Index (CCFI) could "prove lofty."
Contract renewals are being dragged out, partly due to the pandemic but also because of elevated spot rates, the bank's analysts argued. This could mean lower renewal levels than spot numbers suggest, analysts Espen Landmark Fjermestad, Peder Nicolai Jarlsby and Ulrik Mannhart added.
Headwinds to blow
"We see headwinds on the cost side through surging charter rates and a shortage of boxes, especially in the East," they said, with logistical challenges also posing a risk to volumes.
Container throughput in key areas has been at record highs lately, driven partly by seasonal effects but also a global inventory re-stocking trend that will soon abate, the analysts said.
Long Beach in the US achieved its highest-ever throughput figure in October, with trade up 17% year on year as retailers prepare for the holiday season, Fearnley said.
"With retailers importing record amounts of merchandise, inventories are expected to return to normal levels in the coming months," the investment bank added.
Fearnley has cut its rating of Maersk's shares from buy to hold as a result.
The Danish containership giant's stock was trading at DKK 11,465 ($1,825) in Copenhagen. Fearnley's target price is DKK 11,400.
The shares have gained 130% since March. The group added 2% on Friday as SCFI spot rates surged another 12%.
Fearnley has lowered its 2021 and 2022 rate projections for Maersk by 6%, leaving the investment bank largely in line with consensus expectations.
This has been prompted partly by rival Hapag-Lloyd's results.
The German line's share price fell 10% on Friday after it reported flat third-quarter freight rates and less upbeat commentary around the fourth quarter and the first half of 2021.
Strength to persist?
Jefferies analyst Randy Giveans expressed a more bullish stance on the sector as rates hit a record high in recent days, pushing time-charter numbers to a five-year peak as demand continued to climb.
"The strength is expected to persist as multiple liners announce they will be raising freight rates in the coming months between Asia and Europe on rising demand, and multiple containership owners announce new charters at rates two to three time previous charters," he said.
