High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
Jan. 21 (Bloomberg) — Demand to ship dry-bulk commodities will exceed fleet growth in the year’s second half as the freight market begins to recover, Pareto Securities AS said, recommending buying D/S Norden A/S and Golden Ocean Group Ltd.
Demand will advance 7.7 percent this year as the fleet expands 6.7 percent, according to the Oslo-based investment bank. Average daily rates for Capesizes carrying 160,000 metric tons of iron ore and coal will rise 50 percent to $12,000, and earnings for smaller Panamaxes will increase 12.5 percent to $9,000, analysts Jonas Kraft and Erik Haavaldsen said in an e- mailed report today.
China’s 8 percent economic expansion will surpass the government’s target as the country’s share of dry-bulk imports rises to 40 percent from 20 percent in 2003, the analysts said. Steel mills are boosting production as the government spends $150 billion on infrastructure, according to the report.
“After years of a difficult dry-bulk market, we are now getting closer to a turning point,” the analysts said in the report. “We expect the dry-bulk market to remain challenging in the short term, yet demand should start exceeding supply” in the second half of 2013.
The Baltic Dry Index, a measure of commodity shipping costs, averaged 920 last year, the lowest since 1986, according to figures from the Baltic Exchange, the London-based publisher of freight rates. The gauge rose 0.1 percent today, the 13th advance in a row, to 838, remaining at the highest level since Dec. 11.
Daily average returns for all four ship types tracked by the index changed no more than 1 percent. Capesizes, the largest iron-ore carriers, gained 0.2 percent to $9,010 and smaller Panamaxes fell 0.5 percent to $5,831. Supramaxes declined 0.3 percent to $7,610 and Handysizes, the smallest vessels in the gauge, rose 1 percent to $7,079.
– Isaac Arnsdorf, (c) 2013 Bloomberg.
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