Dry bulk cargo carrier Pacific Basin Shipping (2343.HK), which has remained profitable where giant Chinese rivals have failed, forecast weaker freight rates in the dry bulk market in the second half but sees opportunity to expand its fleet.
Klaus Nyborg, deputy chief executive of Pacific Basin, said the dry bulk carrier is prepared to deploy its $1.1 billion stockpile of cash to acquire or charter more vessels should the opportunity arise.
Speaking at the China Investment Summit held in Hong Kong, Nyborg said the company expects deliveries of two more handysize vessels and one roll-on/roll-off vessel during the remainder of the year.
In recent years, shippers have expanded their fleets, creating an oversupply, which analysts expect will continue to push down freight rates, squeezing shippers' profit margins.
"Supply might outweigh demand in the third quarter and trend downward for the rest of the year," said Nyborg.
THE CHINA FACTOR
Pacific Basin's own prospects will depend heavily on demand from China, said Nyborg. China's consumption of iron ore and coal has helped support shippers.
"Without China, this market would have been a complete disaster," he said. He estimated that roughly 40-50 percent of sea cargoes eventually will go to China.
There are risks, though. If China's government curbs bank lending, that could harm steel makers and weaken demand for iron ore and coal shipments. Similarly, if China consolidates smaller steel mills, this would also have an impact on volumes. Iron ore imports remain strong for now. China imported 58 million tons in July, an all-time high. But coal imports fell nearly 40 percent from June's record high.
"These factors are very difficult for us to predict," said Nyborg.
Nyborg said he expects vessel delivery will accelerate during the rest of 2009 but predicts the total tonnage will be less than the market's earlier forecast of about 71 million dead weight tons (dwt).
"We expect less than 50 million dead weight tons will be delivered this year," he said.
About 16.5 million dwt of new dry bulk cargo ships were delivered in January to July this year.
The company had said it was issuing HK$761 million (US$97.6 million) worth of shares to fund its planned purchases of dry bulk vessels or companies.
Pacific Basin three weeks ago reported a 77.8 percent year-on-year drop in first-half net profit to $74.8 million.
Its much bigger rival and industry leader, China COSCO (1919.HK), slipped to a net loss of 4.59 billion yuan ($672 million) in Jan-June as the global recession took a toll on international trade, which badly hit sea transport revenues.
Pacific Basin shares have risen 47 percent this year, closing at HK$5.17 at the end of August, compared with China COSCO's 74 percent gain and the 37 percent advance in the benchmark Hang Seng index .
Klaus Nyborg, deputy chief executive of Pacific Basin, said the dry bulk carrier is prepared to deploy its $1.1 billion stockpile of cash to acquire or charter more vessels should the opportunity arise.
Speaking at the China Investment Summit held in Hong Kong, Nyborg said the company expects deliveries of two more handysize vessels and one roll-on/roll-off vessel during the remainder of the year.
In recent years, shippers have expanded their fleets, creating an oversupply, which analysts expect will continue to push down freight rates, squeezing shippers' profit margins.
"Supply might outweigh demand in the third quarter and trend downward for the rest of the year," said Nyborg.
THE CHINA FACTOR
Pacific Basin's own prospects will depend heavily on demand from China, said Nyborg. China's consumption of iron ore and coal has helped support shippers.
"Without China, this market would have been a complete disaster," he said. He estimated that roughly 40-50 percent of sea cargoes eventually will go to China.
There are risks, though. If China's government curbs bank lending, that could harm steel makers and weaken demand for iron ore and coal shipments. Similarly, if China consolidates smaller steel mills, this would also have an impact on volumes. Iron ore imports remain strong for now. China imported 58 million tons in July, an all-time high. But coal imports fell nearly 40 percent from June's record high.
"These factors are very difficult for us to predict," said Nyborg.
Nyborg said he expects vessel delivery will accelerate during the rest of 2009 but predicts the total tonnage will be less than the market's earlier forecast of about 71 million dead weight tons (dwt).
"We expect less than 50 million dead weight tons will be delivered this year," he said.
About 16.5 million dwt of new dry bulk cargo ships were delivered in January to July this year.
The company had said it was issuing HK$761 million (US$97.6 million) worth of shares to fund its planned purchases of dry bulk vessels or companies.
Pacific Basin three weeks ago reported a 77.8 percent year-on-year drop in first-half net profit to $74.8 million.
Its much bigger rival and industry leader, China COSCO (1919.HK), slipped to a net loss of 4.59 billion yuan ($672 million) in Jan-June as the global recession took a toll on international trade, which badly hit sea transport revenues.
Pacific Basin shares have risen 47 percent this year, closing at HK$5.17 at the end of August, compared with China COSCO's 74 percent gain and the 37 percent advance in the benchmark Hang Seng index .