RE: [PMMC-NLUS] Shipping Stocks: Monster Wave
Very timely. Thanks so much for sharing. sam
Far be it for me or the Pacific Merchant Marine Council to provide financial advice but surfing the net I found these two current items. Other material is out there.
Just thought you might be interested. Anyone watching the industry from an investment perspective? Red China's announcement of its stimulus package seemed to spark renewed interest in global shipping companies.
Shipping stocks were soaring Wednesday afternoon, far outpacing a rally in the broader market that saw the Dow rise 1.66%, the Nasdaq 2% and the S&P 1.57%.
Diana Shipping(DSX Quote - Cramer on DSX - Stock Picks) was up 15% to $12.26 after announcing a time charter contract for one of its Panamax dry bulk carriers, the Coronis, for 11 to 13 months. Diana said it expects to generate $4.6 million for the minimum chartered period.
More on Transportation
· Empty Ships Flock to Subic Bay as Lines Battle Plunging Rates
By Wendy Leung and Francisco Alcuaz Jr.
March 5 (Bloomberg) -- Subic Bay in the Philippines is the busiest it’s been since the U.S. Navy moved out 16 years ago. The traffic surge is coming from ships all carrying the same cargo -- nothing.
Last week, 19 vessels were anchored in the mountain-lined bay awaiting charters near an empty container terminal. The authorities at the port, 110 kilometers west of Manila, were expecting another eight this week.
· “If the downturn continues, we’ll probably get even more,” said Ferdinand Hernandez, senior deputy administrator of the Subic Bay Metropolitan Authority.
Hundreds of vessels have been laid up worldwide as container lines try to boost rates depressed by U.S. and European consumers paring spending on Asian-made furniture, toys and other goods. Still, with shipyards set to deliver the largest amount of container-ships by capacity in at least 15 years in 2009, lines may still struggle to post profits.
“It’s only a matter of how much they are going to lose,” said Gideon Lo, a DBS Vickers Hong Kong Ltd. analyst. “It isn’t likely they can cover costs in 2009 or 2010.”
Neptune Orient Lines Ltd., Southeast Asia’s biggest container carrier, is seeking to raise rates for carrying a 20- foot box from Asia to Europe by $250 from April 1, it said in a Feb. 19 statement. Rates have fallen “drastically” for more than a year, added the company, which expects a full-year loss. A.P. Moeller-Maersk A/S, the world’s largest container line, Evergreen Marine Corp. and Orient Overseas (International) Ltd. have also announced similar increases.
“We hope rates return to normal,” said Katherine Ko, acting spokeswoman for Taiwan’s Evergreen Group, parent of Evergreen Marine, Asia’s largest container line.
The vessels in Subic Bay, which also include car carriers and commodity ships, are typically anchored for a couple of months awaiting charters, said Capt. Perfecto Pascual, general manager of the seaport. Companies use the bay to lay up vessels as it’s secure and offers protection from the elements, he added. As many as 22 ships were anchored there recently, compared with an average of about 10 before the economic crisis began, he said.
Globally, 9.1 percent of container ships, or 427 vessels, have been idled, Lloyd’s List said on Feb. 13, citing Lloyd’s Marine Intelligence Unit, a shipping-data provider. Thousands of containers are also going unused worldwide, leaving ports struggling to find space for them. For instance, Busan International Terminal Co., a wharf-operator in Busan, South Korea’s busiest port, is holding at least 30,000 empty boxes.
“The removal of so much capacity should see a restoration of rates,” said Ken Cambie, chief financial officer of Orient Overseas, Hong Kong’s largest container line. “Rate increases are needed on all trades,” he added.
Container lines traditionally raise rates in the second quarter after a first-quarter slowdown caused by the Chinese lunar new-year holiday and reduced demand from U.S. and European retailers selling off excess Christmas stock.
Any increases this year may be smaller than past ones as the global container fleet grows amid slowing demand. New ships with a combined capacity of 3.9 million boxes are due for delivery this year and next, about a third more than in the past two years, according to AXS-Alphaliner data. Shipyards are now completing vessels ordered two to three years ago when trade was booming.
This year, global container traffic may fall 3 percent, according to Morgan Stanley, as U.S. and European consumers slash spending. China’s exports to the European Union tumbled 17.4 percent in January. The World Bank forecasts a 2.1 percent decline in global trade this year, the first drop since 1982.
Container lines won’t be “able to raise rates much as demand hasn’t returned to previous levels,” said Jack Xu, an analyst at Sinopac Securities Asia Co. in Shanghai.
Lower fuel costs are helping shipping lines, with prices having tumbled about two-thirds from a record in July. Orient Overseas may spend 49 percent less on fuel this year than in 2008, if prices stay at current levels, Cambie said.
Still, while a drop in fuel prices has lowered costs, it’s not enough to return the industry to profit.
Container lines still “have to increase freight rates because they are below cash costs,” said Ryu Je-Hyun, an analyst at Mirae Asset Securities Co. “If they don’t, their cash will start to burn out.”