Courage Marine bearish on market

PUBLISHED : Saturday, 10 December, 2011, 12:00am
UPDATED : Saturday, 10 December, 2011, 12:00am


The dry bulk cargo market, which has seen charter rates dive by up to 58 per cent in the past year, is unlikely to recover until next year, the head of dry bulk shipping company Courage Marine said.

Hsu Chih-chien, the company's chairman, said: 'The main problems in the international bulk shipping market recently are due to the imbalance of supply and demand between the number of vessels and the amount of cargo and increased operating costs, which will not improve until 2012.'

Hsu said oversupply of ships would continue to drag down bulk shipping rates over the next several months, while uncertainties in the global economy would also hurt charter rates.

Growth in the dry bulk fleet would only start to slow in 2013, he said.

British shipbroker Clarkson said there were 2,557 dry cargo bulk carriers totalling 212.7 dwt currently on order, equivalent to 35.2 per cent of the existing fleet of 8,818 bulk carriers totalling 604.8 million dwt.

Dry cargo ships totalling 120.2 million dwt are due for delivery next year, with 60.9 million dwt forecast for delivery in 2013 and beyond.

The shipbroker said the global dry cargo fleet had grown by 69.1 million dwt or 12.9 per cent this year. By comparison, demand for the main bulk commodities of iron ore, coal and grain had risen by about 5 per cent.

Moore Stephens International, a leading accounting and shipping consultant firm, said a survey two months ago expected vessel operating costs to increase 3.8 per cent this year.

It said operating costs were set to climb a further 3.7 per cent next year, with lubricants and seamen expected to post the biggest increases.

The fall in charter rates has mauled Courage Marine, which posted a net loss of US$13.3 million in the first nine months of this year, against a US$9 million net profit in the same period last year. This reflected a 58 per cent drop in turnover to US$15.8 million, from US$37.6 million a year earlier.

Despite uncertainties in the dry bulk shipping market, Courage Marine recently started to renew its fleet by replacing smaller and ageing Handysize ships, which were sold for scrap, with new and larger Supramax ships.

The firm has splashed out US$53.2 million to buy two 57,000 dwt Supramax vessels from China's Zhejiang Zengzhou Shipbuilding. These include the Malta-registered ship, Zorina, which was delivered on Wednesday.

The recent orders came as new vessel prices have dropped more than 40 per cent since 2008, while steel scrap prices are relatively high, climbing by about 7 per cent.

Hsu said the Supramax ships, with cranes to load and unload cargo, a shallow draft and low fuel consumption, were more versatile. They were capable of operating in more ports in developing countries than larger Panamax and Capesize ships.

This flexibility meant vessel charter rates held up better in a depressed shipping market, he said.

Clarkson said the average charter rate for a Supramax vessel last year was about US$30,000 per day but had dropped to US$19,200 this year. By comparison, the rate for a Capesize ship, which at 180,000 dwt is more than three times larger than a Supramax vessel, had fallen to US$13,000 from US$30,500.

Hsu said his company was seeking to buy more Panamax and Capesize vessels because the larger ships allowed the firm to seek additional long-term shipping contracts, which helped maintain its competitiveness in a volatile market.

Of a fleet of seven ships, Courage Marine has one Capesize and two Panamax vessels, which can be chartered for three to five years hauling iron ore or coal.


The last traded price, in HK cents, of Courage Marine shares on the Hong Kong stock exchange