Chinese reset
Despite pessimistic forecasts of foreign trade decline the maritime shipping market has a potential for growth mainly due to the demand of China for dry cargo import.
From summer 2008, the shares of international companies specializing in maritime transportation of dry cargo (DryShips Inc., Diana Shipping, Genco Shipping, Excel Maritime, Eagle Bulk Shipping) have considerable declined. Some of them demonstrated a three-fold decrease on the “bottom”. According to financial analysts it was caused by the decrease of dry cargo flow (iron ore, coal, fertilizers) and freight costs (Baltic Dry).
However, April of the current year saw the signs of a turning point in the situation. According to Dmitri Baranov, leading expert of Finam Management, new growth of the shares should be mainly attributed to a long-lasting growth at the freight market. “As of 15.05.09, BDI showed a record breaking result of 2009 having reached 2432 points against 2298 points as of 10.03.2009. As for Handy index, it exceeded 800 pints on 15.05.09 having stopped at 802 points. So despite the forecasts of a 5-10-pct decrease of global trade, maritime shipping is growing thus enabling the above companies face the future with certain optimism,” Dmitri Baranov told PortNews IAA.
As PortNews IAA was told by Sophia Ragulina, senior analyst of Asset Everest Management, this new growth should be explained by agreements between the above companies and banks on payment delay. The analyst thinks that the shares of companies carrying coal and ore have a fairly good potential. “However, a lot will depend on the demand from China,” Sophia Ragulina stressed.
Dmitri Baranov also associated the market growth with the demand for ore and coal from Chinese industrialists. “First of all, China is still the major source of this revival as it purchases ore and coal for its smelting industry,” the analyst said.
The truth is that steel production development in China entails the growth of iron ore and coal import mainly from Brasilia and Australia by sea. Sophia Ragulina forecasts revival of the demand for steel in 2010 which is to result in higher volumes and higher price of maritime shipping.
Apart from this, the market is supported by China’s import of grain and soy, Dmitri Baranov says. By the way, transportation of grain and oil crop helps the entire global market to “stay in a good shape”.
The decrease of raw stock resources in the world also leads to higher traffic which ensures certain perspectives for ocean carriers. Current stabilization of economy in developed countries and slight increase of output also contributed to the increase of the demand for basic bulk commodities and carriers may participate in their transportation for the benefit of themselves, Dmitri Baranov thinks.
China, having become a “global workshop” during the last decades, confirms its role amid the crisis by supporting the demand of its industry for raw materials thus “pulling up” the players of the ocean shipping market.