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HenryTo
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 Posted: Sun Jul 17, 2005 12:43 am Post subject: The Shipping Bubble |
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Speaking of the Baltic Dry Index... really no new insights but interesting anyway. Original link: http://slate.msn.com/id/2122743/
The Shipping Bubble
Got a canoe? You should do an IPO.
By Daniel Gross
Posted Thursday, July 14, 2005, at 1:13 PM PT
Yo-ho-ho and an IPO
Since the dot-com collapse five years ago, there has been rising concern about bubbles in everything from real estate to oil to hedge funds to investment bubbles themselves. Any sector with a sudden burst of investor enthusiasm is suspect. Which brings us to a most unlikely potential bubble: shipping—the ancient and quotidian business of moving goods around the globe.
In the fall of 2003, Moneybox readers were introduced to the mighty Baltic Dry Index, a measurement of the cost of shipping goods by sea. The steady rise of global trade, and particularly the advent of China as an economic force, boosted the demand (and expense) for berths on cargo ships, thus hiking the index. From a low point of 900 in September 2001, the Baltic Dry had nearly quadrupled by the fall of 2003. The Baltic Dry powered higher, topping 5,000 in January 2004. After falling sharply in the middle of 2004, it spiked again, hitting a new record high of 6,200 last December.
The rising demand for shipping in 2004 created a demand for the stocks of shipping companies. This list of IPOs for the past 12 months contains plenty of shipping news. Last October, U.S. Shipping Partners, which owned eight boats, raised about $135 million. Arlington Tankers, a Bermuda-based tanker company founded in 2004, went public in November. In February 2005 came Dryships, a Greek dry-shipping company founded in 2004 that, according to ipohomes.com, had only two employees. March brought another Greek bearing IPO gifts: Diana Shipping. In June, there were three shipping IPOs: Aries Maritime, a Greek company formed in 2005 with 12 ships; Eagle Bulk Shipping, a one-year-old company with eight dry-bulk carriers; and TBS International. Several more are waiting to float their stocks. TAL International, dry-bulk shipper Genco Shipping & Trading (16 boats), and Golden Energy Marine (nine boats) have all filed for IPOs. The offering of Quintana Marine, an eight-vessel company created earlier this year, is expected to price this week. In June, Bergesen Worldwide, the Norway-based company that is the largest privately owned shipper in the world, announced plans to sell a big chunk of its stock to the public in Europe.
It's easy to understand the source of the shipping enthusiasm. If China's impressive growth continues at the same pace of recent years, and if the global demand for oil continues to rise at the same pace it has in recent years, the reasoning goes, the shipping business should continue to boom. And the promoters are getting exuberant. Antonios Backos, a partner at New York law firm Healy & Baillie, declared in a recent article: "Let the Good Times Roll." Euromoney's 2nd Annual Global Shipping Finance Summit (Registration: 999 pounds sterling) boldly claims, "There's never been a better time to be involved in the shipping industry as an owner or financier."
Here's the problem. This exuberance comes at a time when shippers are paying less to send their goods. Daily rates for the largest oil tankers in June were down 20 percent from the year before, according to the Wall Street Journal. And the Baltic Dry index is off more than 60 percent from its December 2004 peak.
Worse, the quality of the public offerings tends to decline as booms lengthen. The flood of me-too dot-com stocks that came public in the spring of 2000 were nearly all stinkers. And already, as Leia Parker reported in the Wall Street Journal this week, insiders are starting to fret about the recent crop of shipping IPOs, companies that "have big ambitions but little track record." It seems like anyone who owns a canoe is doing an IPO.
Meanwhile, there are signs that investors are growing skeptical. Earlier this month, Chinese shipper Cosco Holdings went public in Hong Kong in a massive $1.22 billion IPO and promptly sank. Last week, South Korean shipper STX Pan Ocean had to accept a lower price for its $540 million IPO in Singapore. And many of the stocks of the companies that recently went public are sagging.
Clearly, investors in shipping companies—and the brokers who book freight—are looking beyond the horizon. It takes a long time to turn an oil tanker around, and the shipping market is slow to respond to sudden upturns in demand. Prices for freight rose so rapidly in 2003 and 2004 in part because it takes a long time to commission new oceangoing tankers and container ships.
When demand rises more rapidly than capacity, of course, the natural response by companies is to increase capacity. But now there's concern that capacity growth could outstrip demand. If China's growth slows dramatically, and global demand for oil doesn't materialize as projected, in a few years there may be a lot of empty ships haunting the seas, like so many Flying Dutchmans. And investors in many of these newly public companies could be left high and dry. |
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rffrydr
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rffrydr
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rffrydr
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| Posted: Tue Feb 08, 2011 3:40 pm Post subject: |
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Very Large Crude Containers now drawing a day-rate of $15,000 compared to $85,000 in the heady days of '08.
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rffrydr
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| Posted: Mon Jan 31, 2011 9:38 pm Post subject: |
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White is the total in thousands of Deadweight Tons in service for bulk carriers and orange is the % of the total fleet on order and green is the level of BDIY
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rffrydr
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| Posted: Sun Jan 09, 2011 10:14 pm Post subject: |
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Timing is everything--and in this biz nothing is obvioius:
| Quote: | “The market was able to take a punch in the face in the form of 200 capesizes and loads of smaller vessels last year but I doubt it will manage another punch without having to hit the deck,” said Erik Nikolai Stavseth, an analyst at Arctic Securities ASA in Oslo who correctly forecast in July that rental costs would more than triple by the fourth quarter.
Rates averaged $34,913 a day in the final three months of 2010, 33 percent more than in the previous quarter. Tariffs are already plunging, dropping 36 percent last week to $12,897, as ships leave yards in China, Japan, the Philippines and South Korea, according to data from the London-based Baltic Exchange, which publishes assessments for more than 50 shipping routes. |
http://www.bloomberg.com/news/2011-01-10/freight-rates-poised-to-tumble-as-35-mile-line-of-ships-passes-coal-demand.html
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rffrydr
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| Posted: Sat Oct 16, 2010 8:10 am Post subject: |
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rffrydr
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rffrydr
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| Posted: Sat Mar 07, 2009 10:26 am Post subject: |
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From LLoyd's List:
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Cargo figures already show a very sharp contraction in port throughput in the final weeks of 2008, with the grim performance figures continuing into the first two months of 2009. Some ports in southern China saw volumes plunge by a third, with no relief in sight.
“The worst is yet to come,” China Merchants chairman and managing director Fu Yuning warned last week. After years of sensational growth figures, Chinese ports will be lucky to see any net increase at all in 2009. China Merchants is provisionally forecasting nationwide throughput of 129m teu, unchanged from 2008. But the figure could well be negative, Dr Fu said in a speech to the Trans-Pacific Maritime conference.
That would be the first time that container volumes have remained the same, or even fallen, year-on year, he said. Hope is now being pinned on China’s massive stimulus package, which is being put in place at high speed as the government responds to the crisis of 20m unemployed migrant workers. The one slightly encouraging development was an improvement in the number of loaded containers moved in the latter half of February, Dr Fu told delegates. And by 2010, he thinks the worst may be over. |
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rffrydr
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| Posted: Sat Nov 29, 2008 9:42 am Post subject: |
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For the Bugs: nothing more real than steel--or is it?
The Ghost Fleet:
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Korean shipyards
Shipyards are all at sea. As vessel prices fall, buyers are reneging on orders, sacrificing deposits rather than adding to fleets at bull market prices. Meantime, huge addition of capacity – the global order book is the biggest since 1973 – suggests a fallow period to follow. Korea, whose three top builders command a global market share of 40 per cent, hoped to ride out the storm by dint of its vessel mix and superior prowess – letting newer, less experienced Chinese yards take most of the pain. But that holds less water these days. Korean shipyards too are suffering cancellations and new orders are slowing. Hyundai Heavy Industries, the number one shipbuilder, saw third quarter net profits plunge by a third. HHI’s share price is roughly one-third the level of end-2007 while Samsung Heavy’s shares have halved over the same period. Some smaller yards have downed tools, with C&Heavy Industries this week calling in the banks to stave off bankruptcy.
Worse is to come. The global order backlog stood at $557bn investment value as of the start of November, according to Clarkson Research Services. Nordea, the ship financing bank, believes maybe 30-40 per cent of these orders will fail to materialise for various reasons, including inability to secure financing. Even assuming Korea suffers proportionately less than others, the impact on the bottom line is magnified by foreign exchange contracts. These effectively lock in currency rates to ensure that when the ship is delivered, the dollars will be worth the same in won terms. A change in accounting rules last month, designed to offset the impact of the falling won, means shipbuilders can recognise valuation gains from up front. These contracts add up to some $50bn, according to the Bank of Korea, making up a sizeable chunk of the country’s external debt. If the dollars fail to come in, in other words, that creates problems for Korea as well as its shipbuilders. |
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rffrydr
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| Posted: Sat Oct 18, 2008 7:50 am Post subject: |
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http://stockcharts.com/h-sc/ui?s=DRYS&p=W&b=5&g=0&id=p83387748488
The counterstrike would take us into May this year, a grand double-top really being two waves down followed by two waves up (a regrouping of the regrouping). Check out the last gasp volume on the downside kicking this whole thing off.
And so it's over: turns out 80 tankers lined up at Newcastle, as seen repeated across the underdevelped ports of EEM economies represents a huge untapped "supply." Full orderbooks on unbuilt shipyards will be just the first of untapped "demand destruction." Suppose you believe in "fundamentals"--would this be your easiest trade ever...or most difficult?
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