Dry bulk sector under 'significant stress'

PUBLISHED : Wednesday, 28 March, 2012, 12:00am
UPDATED : Wednesday, 28 March, 2012, 12:00am


Huge volatility in charter rates, debt problems at some shipowners and overcapacity has created 'an uncertain time for shipowners' this year, though there are still opportunities in Asia, a ship finance expert says.

Russell Beardmore, head of shipping finance in North East Asia for Standard Chartered Bank (Hong Kong), said the dry bulk sector, focused on iron ore, coal and grain trades, is under 'significant stress'.

'Not many people are forecasting a significant recovery until 2013' because overcapacity is expected to keep charter rates depressed, he said. By comparison, major container lines are 'returning to profitability' this year as they reduce the number of ships and increase freight rates.

Beardmore added 'the offshore market will continue to do well' as high oil prices allow oil companies to continue to invest in exploration and offshore development. He said the gas carrier market, comprising liquefied petroleum and liquefied gas tankers, 'will remain fairly strong'.

His comments came after the bank published its ship finance guide, Insights into Shipping 2012.

Hong Kong's big shipping firms include dry bulk operators China Cosco Holdings and Pacific Basin Shipping, box carriers include the Tung-family-controlled Orient Overseas Container Line and in the offshore market, Swire Pacific Offshore.

'There is increasing concern about the large volume of ships on the order books of shipyards in China, South Korea and Japan,' and if there is sufficient finance available from the banks, Beardmore said.

British shipbroker Clarkson estimates there are more than 5,300 merchant ships on order globally, totalling 344.5 million deadweight tonnes, equivalent to 23.2 per cent of the existing world fleet by tonnage.

Germany's HSH Nordbank is the biggest lender to the shipping and offshore industry with a US$32 billion loan book, but it wants to cut this to US$15 billion, Beardmore said. Mainland banks are increasing support to Chinese ship owners, he said.

Standard Chartered has a US$4.4 billion ship finance operation, that comprises loans to Hong Kong owners such as OOCL and KC Maritime, and ship operating leases with firms such as Noble for 22 ships. Beardmore gave no growth target for the bank's future ship loan and lease book, saying it 'would depend on several factors including market conditions and the quality of transactions'.