Rosy future for shipping and tankers:
Moeller, Nippon Yusen to Gain in 2004 on Record Shipping Rates
Dec. 31 (Bloomberg) -- A.P. Moeller-Maersk A/S, Frontline
Ltd. and other ocean shippers, which carry more than 90 percent
of global trade, may profit from a second year of record freight
rates as the world economy expands, led by China and the U.S.
Nippon Yusen K.K., Japan's biggest shipping company, and D/S
Torm A/S, a Danish owner of tankers that haul refined products,
are also set to gain, said shipbrokers and investors including
Kristoffer Stensrud of Stavanger Fondsforvaltning AS in
Stavanger, Norway, who oversees the equivalent of about $1.5
billion.
``We are very optimistic,'' Stensrud said in a telephone
interview. His holdings include A.P. Moeller, the world's No. 1
container shipper, and Frontline, the biggest owner of oil
tankers that can haul 1 million barrels or more. ``Ship owners'
earnings may be at historical highs over the next 12 months.''
Earnings have already jumped this year as China, the world's
most populous nation, imported more raw materials and increased
exports of manufactured goods to the U.S. and Europe. That has
lifted rates for dry-bulk goods such as iron ore and coal to
records, pushed tanker rates to the highest in three decades and
helped container tariffs rebound from a two-year decline.
Shares of Great Eastern Shipping Co., based in India, have
surged more than fourfold this year while Frontline has almost
tripled. Mitsui O.S.K. Lines Ltd., Japan's second-biggest
shipping line, has doubled and A.P. Moeller has gained 78
percent. The Standard and Poor's 500 Index has added 26 percent
in the period.
China's gross domestic product swelled 9.1 percent in the
third quarter, making it the fastest-growing major economy. The
world's sixth-largest economy may grow 9.5 percent next year,
Goldman Sachs Group Inc. economists have forecast.
Ore, Coal
The expansion has spurred demand for energy and raw
materials for steelmaking and construction, boosting rates for
both tankers and ships hauling iron ore and coal. Rising demand
from China, which will host the 2008 Olympics, has also lifted
commodity prices ranging from steel to soybeans.
``As long as China keeps expanding at the current pace, the
markets will remain strong,'' said Erik M. Andersen, director of
market research at R.S. Platou Shipbrokers in Oslo.
The U.S. economy, the world's largest, grew 8.2 percent in
the third quarter, the fastest pace in almost two decades, as tax
cuts and borrowing costs at a 45-year low prompted households to
buy goods such as cars and electrical products. Much of those
imports come from China and other Asian nations, adding to
shipping demand.
The U.S. economy is forecast to grow 4.4 percent next year,
more than the 3.4 percent average during the 10-year expansion
that ended in 2001, according to the latest Bloomberg survey of
economists.
``The U.S.-China combination is very important and also a
cause for concern, as China's growth rate depends on U.S.
consumers demanding imported goods,'' Andersen said. ``It's all
tightly linked.''
Dry-Bulk Rates
The Baltic Dry Index, a measure of the price paid for
shipping dry-bulk goods such as grain and coal, has almost
tripled in the past year.
The cost of shipping a container has on average grown 20
percent this year, and has added as much as 35 percent on
transport across the Pacific, said John Fossey, a consultant for
Drewry shipping Consultants of London. Container shippers have
advised customers they plan to raise prices further in 2004.
Mitsui O.S.K. Lines Ltd., Japan's second-biggest shipping
line, said two weeks ago its pretax profit from operations might
rise as much as 30 percent to a record 100 billion yen ($930
million) by 2007 as it carries more cargo from China. The company
plans to add 20 new dry bulk ships to its fleet of 60 units.
Rising container rates fueled by trans-Pacific trading
helped Mitsui, Nippon Yusen K.K. and Kawasaki Kisen Kaisha Ltd.,
Japan's three biggest shipping companies, report record first-
half profit.
Oil Transport
Oil-tanker rates, measured by the Worldscale standard, have
averaged WS 99 this year on the benchmark route from the Persian
Gulf to South Korea, up 90 percent from last year, Bloomberg data
show. Nominal rates averaged WS 114 in 2000, the best year since
the 1973 oil embargo. Measured in daily earnings, 2003 may have
been the most profitable in three decades, shipbrokers have said.
World oil demand is rising faster than expected on
accelerating economic growth and increasing Chinese consumption,
the International Energy Agency, an adviser to 26 nations on oil
policy, said this month. That may spur demand for tankers and
shore up rates because most of the world's oil reserves are far
from the main users, such as the U.S., Europe and Japan.
Chinese Imports
China will rely on imports for half of its crude oil
consumption by 2007, state-run Xinhua news service reported on
Dec. 12, citing a Ministry of Communications study. That's 13
years earlier than the government's previous estimate. China now
imports 31 percent of the crude oil it needs, the report said.
``The outlook is positive and oil demand will be comfortably
high with the U.S. economy'' recovering, said Saurabh Nakra, a
senior tanker analyst at Drewry Shipping Consultants in London.
``China will of course continue to be a driving force.''
A potential cut in output by the Organization of Petroleum
Exporting Countries in the first half may reduce tanker demand at
a time when oil use falls as warmer weather curbs the need for
heating. Shipyards are set to complete 320 oil tankers next year,
boosting supply and possibly lowering rates, shipbrokers said.
``The party won't last forever, as China can't keep up its
pace of expansion indefinitely,'' said Svein Erik Amundsen, chief
executive at Bergesen d.y ASA in Oslo, the world's biggest gas
shipper with more than 100 gas ships, oil tankers and dry-bulk
vessels. ``We expect to se a normalization of especially dry bulk
rates sometime into next year.''
--Petter Narvestad in the Oslo bureau (47) 22 99 62 10, or
pnarvestad@bloomberg.net, with reporting by Saijel Kishan in
London. Editors: Evensen, Farr, Gregori |
