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SINGAPORE—Thoresen Thai Agencies Pcl, Thailand’s largest
shipping company, expects more volatility in freight
rates because of a lack of spare capacity in the market
for vessels that transport commodities.
“When
supply and demand are very tightly balanced, if there
are situations that throw that balance out of whack,
that’s going to generate a lot of volatility in freight
rates,” managing director Chandchutha Chandratat said.
The
Baltic Dry Index, a measure of rates in the dry-bulk
shipping market, has fallen 11 percent this year to
7,893 last week, after rising to a record 11,039 in
November on demand for iron-ore cargoes. The measure is
up 41 percent from this year’s low of 5,615 on January
29, according to data on the London-based Baltic
Exchange.
Thoresen
and other dry-bulk shipping companies including Mercator
Lines (Singapore) Ltd. are expanding their fleets to
capitalize on the rising demand for hauling commodities,
while locking in revenue through longer-term contracts
to protect themselves from the swings in freight rates.
“When
there’s no real spare capacity in the system, we are
bound to have much greater volatility than in times when
there’s slack capacity in place,” Chandchutha said by
phone from
Bangkok
late last week.
Dry-bulk
shipping demand will rise 5.5 percent to 6 percent this
year while net supply of ships will increase 7 percent,
assuming the global economy will grow about 4 percent,
Chandchutha said. About 40 percent of Thoresen’s revenue
is assured for this year, he said.
Thoresen,
which specializes in smaller bulk ships, expects its
average freight rates in the year ending September 30 at
$15,400 a vessel per day, similar to the year before, he
said.
Ship
brokers and analysts expect swings in freight rates to
remain. “Volatility is hence deemed to persist, but on a
high rate plateau,” Oslo-based DnB NOR Markets analysts
Henrik With and Glenn Lodden said in their weekly
report. “Dry-bulk shipping markets remain robust and the
main drivers are elevated iron-ore trade from
Brazil,
the South American grain export season and a firm coal
market.”
Thoresen,
which focuses on trades in
Asia and the
Middle East, said a
US
recession will have an “indirect effect” on freight
rates as slower trades in and out of the US will free up
more ships, pressuring freight rates lower.
The
Bangkok-based company has no plans to diversify into
bigger bulk vessels as its expertise lies with smaller
ships, Chandchutha said. Thoresen’s fleet is made up of
handysize vessels, with can carry up to 30,000 tons of
cargo, and handymax vessels, which can transport between
30,000 tons and 60,000 tons.
Thoresen
has ordered seven new vessels and will commit two more
“in the near future,” Chandchutha said. The carriers
will be delivered between 2009 and 2011.
The
concern that a global oversupply of ships from 2009 will
send freight rates lower may be offset by cancellation
of some orders due to credit problems, possible delays
in delivery by shipyards and scrapping of aging vessels,
Chandchutha said.
“Freight
rates have to drop significantly, some 60 percent to 70
percent from current levels for shipping companies to
lose money, so during that time we should still make
money,” he said.
Thoresen
reported a record profit of 2.58 billion baht ($83
million) in its fiscal first quarter ended December.
Profit in the fiscal year ending September this year may
be higher than last year’s 4.97 billion baht,
Chandchutha said.
To
protect itself from volatile shipping rates and
capitalize on higher oil prices and increased
exploration, Thoresen is expanding its drilling rig and
sub-sea engineering business through its
Singapore-listed subsidiary Mermaid Maritime Pcl.
(Bloomberg) |
