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Home / Business / Companies / Freight and logistics

Carrier glut hits shipping revenue

16 Jan, 2006 09:53 AM2 mins to read

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LONDON - Shipping owners could be in for a choppy time this year with shipping rates predicted to fall for the second straight year.

"I don't like the look of the market this year," said Martin Stopford, head of research at London-based Clarkson, the world's largest shipbroker. "Owners are in
for a rough ride."

Revenue for the largest dry-bulk vessels is likely to average US$32,000 ($46,000) a day this year compared with US$37,552 a day last year.

Shipbuilders are delivering new vessels and creating a glut of carriers on world markets, hurting earnings for owners. Drewry Shipping says the capacity in the global dry-bulk carrier fleet may rise 6.9 per cent this year, outpacing the 4.5 per cent increase in trade in commodities.

The Bloomberg Dry Ships index fell for the first year in four last year as new vessels were delivered. However, the index is still almost triple its 10-year average.

New Delhi-based Drewry Shipping analyst Aarti Gupta said "the party may be over" but rates were still above historical averages.

Another factor behind the downturn is an easing in Chinese growth, which is seen as slipping to between 8 per cent and 9 per cent, down from 9.4 per cent.

Drewry thinks global dry-bulk trade may reach 2.76 billion tonnes, up from 2.64 billion tonnes last year and 2.48 billion in 2004. The fleet of dry-bulk ships will increase to 371 million deadweight tonnes, or 6540 vessels.

For the largest carriers, called capesizes, the fleet will expand by 7.2 per cent to 118 million deadweight tonnes on 696 vessels.

Nigel Prentis, head of research at HSBC Shipping Services in London, said: "This threatens to tip the balance into oversupply, leading to a softening in rates."

Rising deliveries of new ships and easing port congestion last year helped push the Baltic Dry index down 48 per cent from records in 2004. The index measures shipping costs for a range of dry-bulk ships on the most common voyages.

The Baltic Exchange said freight rates for capesizes to China from Australia, the world's largest exporter of iron ore and coal, were at US$9.10 a tonne on January 13, compared with last year's average of US$12.28 a tonne.

- BLOOMBERG

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