The shipping industry is the most pessimistic in six years about its prospects as a fleet surplus persists, according to a survey by law firm Norton Rose Fulbright.
Two thirds of respondents working in the industry said they were pessimistic about its prospects, the most negative outlook since 2009, the London-based company said in a statement. The biggest contributor to their negative view was excess fleet capacity.
While parts of the maritime industry such as the market for hauling oil are surging this year, others are slumping. Rates for delivering Saudi Arabian crude to Japan, a benchmark route, just had the highest first half of a year since at least 2009. The Baltic Dry Index, measuring coal and iron ore freight, had the worst first six months ever.
“Shipping is a notoriously speculative business,” Harry Theochari, the firm’s global head of transport, who has worked in the industry for more than 30 years, said by phone. “We have this huge overcapacity but a lot of shipowners are still going out and ordering ships.”
The survey collated responses from 94 people working across the maritime industry. More than half saw over-capacity as shipping’s biggest challenge, and continuing orders for newbuild vessels has led to increased pessimism, according to Theochari.
Tanker rates from Saudi Arabia to Japan averaged $63,476 this year, according to Baltic Exchange data. The Baltic Dry Index averaged 627 points, the lowest for the start of a year since it was first published three decades ago.
Jack A. Bass Managed Accounts hold no shipping stocks – and we are not trying to guess where the bottom might be. We are content to invest in sectors with better prospects and watch the shipping sector for a revival.
Iron Ore Tumbles on Supply Jump as Goldman, Citi Prove Accurate
Iron ore capped the biggest weekly loss since April as shipments surged and data showed the slowdown in China’s steel industry deepened, vindicating banks from Goldman Sachs Group Inc. to Citigroup Inc. that had forecast declines.
Ore with 62 percent content delivered to Qingdao lost 0.7 percent to $55.26 a dry metric ton on Friday, falling for a seventh day, according to Metal Bulletin Ltd. Prices lost 11 percent this week to the lowest level since April. Producers’ shares sank, with Rio Tinto Group dropping to the lowest since 2009 in London and Anglo American Plc falling to a 12-year low.
Iron ore’s decline eroded gains seen in the second quarter, when prices rebounded from a decade-low as shipments missed expectations. The top suppliers, including Rio in Australia and Brazil’s Vale SA remain intent on increasing supply as they seek to boost volumes and reduce costs per ton, expanding a glut even as demand in China slows. Goldman and Citigroup said the gains in April and May wouldn’t last as low-cost production was set to increase further while demand growth slowed in China.
“The majors are continuing to push the tons,” Paul Gait, an analyst at Sanford C. Bernstein & Co. in London, said after data showed record shipments in June through Port Hedland, the world’s largest bulk-export terminal. “Clearly, that’s bad for prices, there’s no way that could be interpreted positively.”
Exports from the port that handles cargoes from BHP Billiton Ltd. and Fortescue Metals Group Ltd. jumped to a record 38.4 million tons last month, according to data on Thursday. Shipments from Brazil, the biggest exporter after Australia, surged to 32 million tons last month from 29.55 million a year earlier, the government said.
“We’ll still see prices dropping below $40,” Ivan Szpakowski, a commodities strategist at Citigroup in Hong Kong, said by phone on Friday. “Just like the weakness in exports were the main reason for the rally, now the recovery is likely to drive it lower.”
The purchasing managers’ index for China’s steel industry, which has contracted for more than a year, extended its decline in June to about a seven-year low of 37.4, government data compiled by Bloomberg showed. New orders slumped to 27.9 from 37.6 in May. A reading below 50 indicates contraction. China is the world’s largest buyer of seaborne iron ore.
Iron ore holdings at Chinese ports rose 2.8 percent this week to 81.6 million tons, the first increase since April, data from Shanghai Steelhome Information Technology Co. showed. Australia & New Zealand Banking Group Ltd. said last month that the declining trend in inventories would soon reverse and lead to lower prices.
Shipments from Australia may surge 10 percent next year, more than twice the pace forecast for 2015, the government said on Tuesday. The outlook cited expansions by producers including Rio as well as supplies from billionaire Gina Rinehart’s Roy Hill mine, which are set to commence this half.
The global surplus will expand to 151 million tons in 2018 from 34 million tons this year, according to UBS Group AG. Prices may tumble into the $30s in the second half as surging low-cost output swamps the market, Capital Economics Ltd. said.
Rio’s stock fell as much as 2.2 percent to 2,576 pence in London, while BHP was 1.9 percent lower, down 33 percent over the past 12 months. Anglo, which produces iron ore alongside materials from copper to diamonds, dropped as much as 2.7 percent to 893.20 pence, the lowest since April 2003.
In Sydney, Fortescue declined 4.7 percent to take this year’s drop to 34 percent.
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