Greeks Bet Ship Rout Ending With Most Orders Since 2008: Freight
By Rob Sheridan - Apr 30, 2013 8:44 PM GMT+0800
Greek shipping companies, the owners of one in six merchant vessels, are ordering the most newiron-ore carriers since 2008, betting the five-year rout in charter rates may be nearing an end.
The companies ordered 12 Capesizes last quarter, the most since the beginning of 2008, according to data from Golden Destiny SA, a shipbroker in Piraeus, Greece. Freight swaps, traded by brokers and used to bet on future transportation costs, anticipate rates will almost triple by the fourth quarter. Stock in Athens-based Diana Shipping Inc. (DSX), which owns 33 vessels, will climb 6.5 percent in a year, the average of 11 analyst forecasts compiled by Bloomberg shows.
Ship prices plunged to the lowest in almost a decade in 2012 and charter rates tumbled 99 percent since 2008. Construction costs are now so low that owners will probably order $250 billion of new vessels by 2016, according to Pareto Shipping AS, an Oslo-based research company. The Bloomberg Dry Ships Index of 12 companies rallied 9.4 percent this year, while the price of a new Capesize climbed for the first time in 33 months in March.
“Greek owners tend to have an instinct for these things,”said Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a 166-year-old shipbroker in London. “The fact we are seeing more buying is certainly a sign that sentiment is turning. They are sensing an opportunity.”
The orders by Greek owners, who have more merchant vessels than companies from any other nation, are twice last year’s total, according to Golden Destiny’s data. Shares of Diana Shipping advanced 29 percent to $9.45 this year and will reach $10.06 in 12 months, the estimates show. The company plans to acquire a ship each month through 2014, Executive Vice President Ioannis Zafirakis said by phone yesterday.
Diana Shipping has the third-largest weighting in the Bloomberg Dry Ships Index, while Pacific Basin Shipping Ltd. (2343)ranks first. Shares of Hong Kong-based Pacific Basin, which has a fleet of 148 ships, will advance 6.5 percent in a year, according to the average of 19 forecasts. The average Capesize is about 286 meters (938 feet) long and 46 meters wide, carrying more than 150,000 metric tons of iron ore.
The rebound may be curbed by the existing fleet’s size and by Chinese economic growth that’s the second-slowest this decade, even at an 8 percent annual pace. The nation is the biggest global importer of iron ore and coal, which generate the most demand for dry-bulk shipping.
Chinese steel mills may need less iron ore because they have stockpiled the most supplies in at least three years. Inventories of steel reinforcement bars are the highest for the time of year since at least 2010, according to data from Shanghai Steelhome Information, an industry research company.
Orders for new vessels now come to 15 percent of the existing fleet, compared with a record 100 percent in 2008, according to data from IHS Fairplay, a Redhill, England-based maritime research company. Some orders probably have been canceled and the actual number is likely even lower, according to Hansteen at Pareto.
John Fredriksen, the world’s richest shipping investor, is also spending billions on establishing a fleet of new, fuel-efficient vessels, including ore carriers. Frontline 2012 Ltd. (FRNT), in which he is the biggest shareholder, had four new Capesizes on order at the end of last year.
Frontline 2012 ordered its new ships from STX Jinhae inSouth Korea and at China’s Longxue and Jinhaiwan yards. Chinese shipbuilders accounted for 48 percent of Capesizes on order at the start of April and Japan ranked second with a 42 percent share, according to data from Clarkson.
Prices of new Capesizes probably have fallen far enough to reflect supply and demand, according to Will Fray, a senior analyst at Maritime Strategies International Ltd., a London-based freight-forecasting company. A new ship in China costs $47 million, down from as much as $99 million in 2008, according to London-based Clarkson.
The Greek orders for vessels are mostly from companies that are closely held, rather than publicly traded, according to Golden Destiny. Diana Shipping said April 9 it was buying a secondhand Capesize for $27 million.
“The Greeks traditionally are more successful than most,”said David Webb, a director at Arrow Chartering (U.K.) Ltd., who correctly predicted rallies in freight rates in 2011 and 2012.“They are punting at what they think is the complete bottom.”
To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net
To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net
The companies ordered 12 Capesizes last quarter, the most since the beginning of 2008, according to data from Golden Destiny SA, a shipbroker in Piraeus, Greece. Freight swaps, traded by brokers and used to bet on future transportation costs, anticipate rates will almost triple by the fourth quarter. Stock in Athens-based Diana Shipping Inc. (DSX), which owns 33 vessels, will climb 6.5 percent in a year, the average of 11 analyst forecasts compiled by Bloomberg shows.
Ship prices plunged to the lowest in almost a decade in 2012 and charter rates tumbled 99 percent since 2008. Photographer: Kevin Lee/Bloomberg
“Greek owners tend to have an instinct for these things,”said Dominic Meredith Hardy, an analyst at Galbraith’s Ltd., a 166-year-old shipbroker in London. “The fact we are seeing more buying is certainly a sign that sentiment is turning. They are sensing an opportunity.”
Worst Recession
Capesizes are earning about $4,900 a day, compared with $229,000 at the peak in 2008. The slump was caused by record ordering in 2007 and 2008, just before the global economyentered its worst recession since World War II. The fleet’s expansion is now slowing and Capesize charter costs will advance to an average of $17,500 a day next year, according to nine analyst estimates compiled by Bloomberg.The orders by Greek owners, who have more merchant vessels than companies from any other nation, are twice last year’s total, according to Golden Destiny’s data. Shares of Diana Shipping advanced 29 percent to $9.45 this year and will reach $10.06 in 12 months, the estimates show. The company plans to acquire a ship each month through 2014, Executive Vice President Ioannis Zafirakis said by phone yesterday.
Diana Shipping has the third-largest weighting in the Bloomberg Dry Ships Index, while Pacific Basin Shipping Ltd. (2343)ranks first. Shares of Hong Kong-based Pacific Basin, which has a fleet of 148 ships, will advance 6.5 percent in a year, according to the average of 19 forecasts. The average Capesize is about 286 meters (938 feet) long and 46 meters wide, carrying more than 150,000 metric tons of iron ore.
Commodity Trade
Though the fleet is still expanding, growth will slow and seaborne commodity trade will expand 6 percent annually until 2016, Nicolai Hansteen, an analyst at Pareto, told a conference in Copenhagen on April 17. Dry-bulk shipping, which hauls cargoes from grains to coal to iron ore, probably will have the biggest share of the predicted $250 billion of vessel orders, according to Pareto. Capesize prices are the lowest ever when adjusted for inflation, Hansteen said.The rebound may be curbed by the existing fleet’s size and by Chinese economic growth that’s the second-slowest this decade, even at an 8 percent annual pace. The nation is the biggest global importer of iron ore and coal, which generate the most demand for dry-bulk shipping.
Chinese steel mills may need less iron ore because they have stockpiled the most supplies in at least three years. Inventories of steel reinforcement bars are the highest for the time of year since at least 2010, according to data from Shanghai Steelhome Information, an industry research company.
Order Book
It takes about two years for a Capesize to be delivered once ordered, according to Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo. Supply of the vessels almost tripled in the eight years through 2012, according to data fromClarkson Plc (CKN), the world’s largest shipbroker. Iron-ore shipments increased 87 percent to 1.1 billion tons annually in that span as coal cargoes expanded 65 percent to 1.06 billion tons.Orders for new vessels now come to 15 percent of the existing fleet, compared with a record 100 percent in 2008, according to data from IHS Fairplay, a Redhill, England-based maritime research company. Some orders probably have been canceled and the actual number is likely even lower, according to Hansteen at Pareto.
John Fredriksen, the world’s richest shipping investor, is also spending billions on establishing a fleet of new, fuel-efficient vessels, including ore carriers. Frontline 2012 Ltd. (FRNT), in which he is the biggest shareholder, had four new Capesizes on order at the end of last year.
Frontline 2012 ordered its new ships from STX Jinhae inSouth Korea and at China’s Longxue and Jinhaiwan yards. Chinese shipbuilders accounted for 48 percent of Capesizes on order at the start of April and Japan ranked second with a 42 percent share, according to data from Clarkson.
Merchant Fleet
The glut in dry-bulk freight is mirrored across the merchant fleet. The ClarkSea Index, an overall measure of costs for shipping, averaged $9,600 a day last year, the lowest on record, Clarkson data show. As much as 90 percent of trade moves on vessels, according to the Round Table of International Shipping Associations.Prices of new Capesizes probably have fallen far enough to reflect supply and demand, according to Will Fray, a senior analyst at Maritime Strategies International Ltd., a London-based freight-forecasting company. A new ship in China costs $47 million, down from as much as $99 million in 2008, according to London-based Clarkson.
The Greek orders for vessels are mostly from companies that are closely held, rather than publicly traded, according to Golden Destiny. Diana Shipping said April 9 it was buying a secondhand Capesize for $27 million.
Anticipated Revival
The shipping company will report a net loss of $14.8 million for this year before earning $890,000 in 2014 and $43.8 million in the following year, according to the averages of 17 analyst estimates compiled by Bloomberg. Diana Shipping’s planned vessel purchases are because the company anticipates a rebound in rates, Zafirakis said in the phone interview.“The Greeks traditionally are more successful than most,”said David Webb, a director at Arrow Chartering (U.K.) Ltd., who correctly predicted rallies in freight rates in 2011 and 2012.“They are punting at what they think is the complete bottom.”
To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net
To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net
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