Tanker, dry bulk marts may remain in rough waters

Companies in the tanker and dry bulk shipping markets are not expecting a strong recovery until 2012, as freight rates are likely to remain depressed in the next two years.

"The short-term scenarios are not strong and the (dry bulk) market is expected to worsen until at least 2011," Global Maritime Ventures Bhd chief executive officer Norulhadi Md Shariff told Business Times via e-mail.

Chemical tanker rates and earnings are expected to remain bearish in 2010, with a recovery in freight rates possible in 2011, should there be positive world gross domestic product growth.

"We don't foresee a big leap in freight rates for tankers next year due to the anticipated small growth in the world economy. If there is growth in the world economy, we foresee a lower tonne miles being moved as more refineries are being built nearer to the place of consumption," Norulhadi said.

On the dry bulk market, he said the Baltic Dry Index (BDI), which measures changes in the cost to transport raw materials, has shown a 12 per cent decline since mid-November 2009 mainly due to over stocking of iron ore and coal by China and India.

The index is, however, expected to rise after Chinese New Year, when the Chinese start restocking coal and iron ore.

"We expect the BDI will not be hovering very much off what we saw the last 15 months. Likewise for the tanker market, we don't expect any miracles," Norulhadi said.

Maritime Institute of Malaysia (Mima) research fellow Nazery Khalid, however, is more optimistic on both segments.

"Based on major economic indicators and patterns of new building orders, scrapping activities, freight rates, vessel prices, fleet deployment and port throughput, one can be bullish about the prospect of the dry bulk segment in 2010," Nazery said.

He said China almost single-handedly propelled the bulk segment's recovery from its slump of last year, and upticks in the economies of Europe and emerging economies in Asia have also contributed to the segment's rebound.

"As China accounts for a third for global demand for bulk shipping, its economic performance will be keenly watched by bulk shipping players.

"I am confident that China should be able to register a growth of around 9 per cent as forecast, provided there is no untoward events and developments that may put a spanner in the growth of its economy and the global economic recovery," Nazery said.

On the tanker segment, he said major economic indicators point to the dawn of a global economic recovery, which should support demand for oil and other tanker cargoes. This will be good news for tanker owners.

Source: Business Times