Dry bulkers face worst pain in shipping slump: S&P

Tue Mar 13, 2012 11:39am EDT
 
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By Jonathan Saul

LONDON (Reuters) - The dry bulk shipping sector faces the heaviest oversupply pressures over the next 12 to 18 months compared with the oil tanker and container markets and will be last of the three to recover, Standard & Poor's said on Tuesday.

Ship owners went on an ordering spree between 2007 to 2009 bolstered by earnings as rates in the bulk sector for larger capesize vessels, which carry iron ore and coal cargoes, reached a peak of over $230,000 a day in 2008. Average capesize earnings have slid to just over $5,000 a day this week, below operating cost levels.

"This sector will continue out of the three shipping segments ... to face the heaviest oversupply compared to demand in particular this year and next year," said Izabela Listowska, associate director with ratings agency Standard & Poor's.

"For the next 12-18 months, we see no improvements (in rates) and then as per our current base-case only 10 percent up and that will be a moderate improvement from very depressed levels."

Shipping firms, especially in dry bulk, already hit by economic turmoil, weak earnings and oversupply now face tighter financing as banks cut their exposure to risky and dollar denominated assets such as ship finance to meet tougher capital rules.

"We see lower (bulk) demand growth. Last year there was (growth of) about 5 percent in demand for tonnage," she said. "We expect this to moderate in 2012 simply due to slowing economies, world trade and steel consumption in particular will be the reason."

One of Japan's oldest shipping firms Sanko Steamship sought to reassure its clients on Tuesday that day-to-day operations for nearly 200 vessels were running as normal, four days after alerting creditors it would not be able to pay some bills on time due to the shipping sector downturn.

"The general outlook for the global shipping industry for 2012 remains negative," Listowska told Reuters in an interview.   Continued...