China Merchants Group chief sees no end yet to dry bulk cargo fleet woes

Dry bulk cargo sector will still be suffering from excess capacity, says China Merchants

PUBLISHED : Wednesday, 06 March, 2013, 12:00am
UPDATED : Wednesday, 06 March, 2013, 5:05am

The business woes of dry bulk cargo shippers are unlikely to end this year because of excess capacity, according to the chairman of the China Merchants Group, Fu Yuning.

"The dry bulk cargo shipping sector will still be under pressure," Fu said yesterday.

"I don't expect the problem of excess capacity to improve this year."

Excess capacity has put pressure on freight rates, hurting shipping companies' profits.

He said China Merchants, a state-owned conglomerate which has operations in shipping, ports and property, had no plans to expand its shipping fleet any further this year.

But its capacity would continue to increase, because some ships ordered earlier had still to actually join the company's fleet, he said.

The Baltic Dry Index, a measure of commodity shipping rates, fell to the lowest level in 26 years last year, mainly because of uncertainty in the global economy and excess capacity.

The weakness in the global economy continues to depress the shipping sector, but Fu said he expected volumes on Pacific routes to improve this year as the European economy had stabilised.

"Once global trade picks up slightly, shipping companies should take the chance to rearrange their capacity," he said.

However, he said, fuel costs would stay high because of high oil prices.

"Oil prices have been stable over the past two months, but there is still upward pressure," he said.

Fu said he hoped quantitative easing, or money printing, by central banks around the world, would not cause speculation in oil prices.

He said he expected China's exports to increase from last year but achieving 8 per cent growth in foreign trade would not be easy, as uncertainty over the European debt crisis remained.