Citigroup: Bulk-Shipping Recovery Starting in 2014
By Michelle Wiese Bockmann
(Bloomberg) — Earnings for ships that carry dry- bulk commodities are set to start recovering in 2014 as fleet growth slows to keep pace with demand for the first time in four years, said Citigroup Global Markets Inc.
Expansion will weaken to 5 percent amid fewer deliveries of new vessels, compared with an 18 percent average pace in the 2011-13 period, analysts led by New York-based Christian Wetherbee said in a report e-mailed today. Demand for cargoes of minerals and grains will gain 5 percent next year, it showed.
“Dry-bulk supply and demand is currently challenged, but we believe there is a solid potential for recovery beginning in the second half of 2014,” the analysts said. Returns are set to start rebounding to “sustainably profitable levels,” according to the bank.
The Baltic Dry Index, a measure of commodity shipping costs, reached its lowest annual average in 26 years in 2012 amid an oversupply of vessels and slowing demand. The global fleet of 9,490 dry-bulk ships will haul an estimated 4.2 billion metric tons of cargo this year, 5 percent more than in 2012, according to Clarkson Plc, the biggest shipbroker.
Citigroup published the report as it began coverage of Navios Maritime Partners LP by advising investors to buy the stock. An analysis indicates the Piraeus, Greece-based owner of 21 dry-bulk vessels probably will “at least maintain” its annual dividend of $1.77 a share through next year, equating to a 13 percent yield, the bank said.
The index gained 0.1 percent to 747 today, helped by stronger earnings for Panamax ships, figures from the London- based Baltic Exchange showed. Daily average returns for Panamaxes, the largest vessels to navigate the Panama Canal, added 1.7 percent to $5,963, extending the five-session increase to 15 percent.
Average returns for Capesizes, the biggest carriers of iron ore and coal, declined 1 percent to $7,171 a day. Supramaxes, which haul about 25 percent less cargo than Panamaxes, rose 0.4 percent to $6,986 after 21 declines in a row. Handysizes, the smallest ships tracked by the index, slid 0.3 percent to $6,223.
Copyright 2013 Bloomberg.
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