Johanna
Englundh: Welcome
to
Morningstar.
The
attacks
on
ships
in
the
Red
Sea
are
threatening
maritime
safety
and
disturbing
global
supply
chains.
And
to
avoid
the
area,
vessels
are
diverting
around
Africa,
a
journey
that
adds
at
least
10
days
in
travel
time,
making
the
trips
much
more
expensive.
But
despite
these
highly
negative
events,
shipping
giants
have
started
the
new
year
soaring
on
the
stock
market
and
Danish
Maersk
has
gained
over
15%
in
the
first
week
of
trading,
making
it
the
best
performing
stock
in
the
Morningstar
Europe
Index.
How
does
this
all
really
add
up?
I’ve
got
Morningstar’s
European
market
strategist,
Michael
Field,
with
me
today.
Michael,
can
you
explain
how
the
attacks
in
the
Red
Sea,
that
increase
both
time
and
operating
costs
for
shipping
companies,
end
up
resulting
in
higher
share
prices?
Michael
Field: For
sure.
It
doesn’t
make
a
whole
lot
of
sense
when
you
put
it
like
that.
It
sounds
like
a
very
negative
event
both
for
the
global
economy
and
then
also
for
those
shipping
companies
that
you
mentioned.
But
weirdly
and
slightly
perversely,
it
is
actually
affecting
the
share
prices
positively.
So,
to
give
some
background
to
the
current
situation,
in
global
shipping
at
the
moment,
there’s
a
glut
of
supply.
So,
there’s
not
enough
demand
and
there’s
too
much
supply.
So
that’s
bad
for
freight
rates.
Freight
rates
have
gotten
down
a
lot
just
because
of
this
fact.
Now,
all
of
a
sudden,
with
this
issue
in
the
Suez
Canal
means
that
a
lot
of
that
capacity
is
actually
being
used
up
because
they
have
to
go
around
Africa
and
then
suddenly
there’s
less
capacity
available
and
suddenly
what
that
does
then
is
kind
of
spike
freight
rates
which
is
what
we’ve
seen
in
the
last
number
of
weeks
which
in
the
current
moment
when
freight
rates
were
very
depressed
is
a
really
welcome
thing
for
those
shipping
companies
and
for
the
investors
of
those
shipping
companies
of
course.
Englundh: So
how
much
have
the
prices
actually
increased?
Field: So,
it’s
difficult
to
get
kind
of
a
full
reading
on
it
because
some
of
it’s
regional
and
then
some
of
the
knock-on
effects
now
are
moving
towards
Asia
and
other
parts
of
the
world
as
they
look
for
that
capacity
in
other
parts
and
try
to
move
that
to
the
Suez
Canal
or
to
pick
up
some
of
that
slack
from
the
Suez
Canal.
But
you’ve
seen
freight
rates
depending
go
up
anywhere
between
20%
and
50%
depending
on
the
route.
So,
it’s
been
massively
significant.
It’s
hard
not
to
overstate
how
significant
it
has
been.
Englundh: Okay.
And
for
how
long
do
you
think
that
these
disruptions
in
the
Red
Sea
can
go
on
for?
Field: That
is
the
million-dollar
question.
I
think
in
the
beginning,
when
something
like
this
happens
–
this
isn’t
the
first
time
something
has
happened
in
the
Suez
Canal.
Two
years
ago,
we
had
the
ship
that
got
lodged
along
the
Suez
Canal
and
took
a
number
of
weeks
to
actually
dislodge
it,
which
started
as
something
of
a
comical
situation
but
actually
had
some
very
serious
ramifications
for
shipping.
So,
because
so
much
trade
flows
through
this
area,
it’s
really
important.
And
it’s
difficult
to
overstate
again
how
the
effects
of
something
like
this
can
actually
make
a
huge
difference
for
quite
a
long
time.
It’s
difficult
as
well,
the
fact
that
we
have
no
precedents,
right?
We
had
the
Somali
pirate
attacks
in
the
last
10,
15
years,
et
cetera.
But
it’s
been
a
relatively
quiet
period
in
that
region.
And
then
suddenly
this
has
picked
up
again.
So,
initially
I
think
investors
guesses
and
we’re
judging
by
the
share
price
here
and
the
reaction
was
a
number
of
days
or
possibly
a
couple
of
weeks.
But
the
share
price
reaction
that
you
mentioned,
Maersk
has
gone
up
so
much
in
the
last
few
weeks,
is
now
showing
you
that
actually
investors
are
thinking
this
could
be
a
few
months
before
it
gets
fixed
to
some
degree,
which
makes
sense
given
that
what’s
involved,
you’re
going
to
need
the
US
or
other
military
powers
to
actually
ramp
up
security
in
the
area
and
try
to
convince
companies
like
MSC
and
Maersk
that
it’s
safe
to
actually
use
the
Suez
Canal
again,
which
may
take
some
time.
Englundh: So,
your
take
on
Maersk
is
that
it’s
still
undervalued
despite
this
recent
rally.
Why
is
that?
Field: So,
I
think,
we’re
long-term
investors
at
Morningstar.
And
if
we
look
at
our
valuation
for
Maersk,
we’ve
been
saying
for
a
while
that
the
fall
that
we
saw
last
year
after
those
bumper
profits
that
the
company
earned
in
2021
and
2022,
we
were
saying
that
we’re
looking
at
a
couple
of
lean
years
ahead
while
the
industry
is
over-capacitated,
but
coming
out
of
that,
the
company
should
be
in
good
shape
again.
It’s
got
a
very
healthy
balance
sheet.
It’s
got
pretty
low
costs
relative
to
the
industry.
So,
we’ve
seen
that
supported
the
valuation
and
we
think
we
thought
certainly
that
investors
were
over-pessimistic
on
the
stock.
Now
some
of
that’s
recovered
in
the
last
few
weeks
which
is
very
welcome
to
see,
but
I
think
again,
investors
really
need
to
look
at
not
just
the
short-term
story
with
this
but
also
the
long-term
story
around
the
company
and
then
they
can
see
the
value
in
it
then.
Englundh: We
will
for
sure
be
following
the
events
in
the
upcoming
months.
Thank
you,
Michael,
for
joining
us
today.
Until
next
time,
I’m
Johanna
Englundh
for
Morningstar.
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