Pacific Basin plans to invest US$1 billion in Chinese port terminals
Pacific Basin Shipping Ltd, the world's largest operator of modern so-called handysize vessels, plans to invest in more port terminals in China because of the country's surging imports of coal and ore.
Growing: 'There hasn't been sufficient investment in dry-bulk terminals' in China, said Pacific Basin's Mr Nyborg, adding that the development of infrastructure and industries in China pointed to strong growth ahead
'We have ambitions to grow our port business,' deputy chief executive officer Klaus Nyborg said in a Sept 14 interview in Hong Kong. The company could invest up to US$1 billion on expansion plans, including ships and terminals, although it has not made a final decision, he said.
China's construction boom has helped double rates for shipments of raw materials, quadrupling first-half profit at Pacific Basin. Buying into terminals may help the shipping line weather any fall in rates caused by a drop in demand or expansion of the global fleet.
'Operating ports is a more stable business than shipping,' said Paul Chan, who helps to manage about US$1.8 billion at Invesco Asia in Hong Kong. 'The question is whether the company can get hold of strategic ports.' In July, Pacific Basin agreed to take a 45 per cent stake in a terminal in Nanjing, eastern China. The venture's approved total investment is about US$74 million, Pacific Basin said. The company also has a venture in the United Arab Emirates.
The shipping line could raise US$1 billion for investments from cash on hand, loans against its fleet and other sources, said Mr Nyborg, 43. Capital expenditure in 2006 totalled US$286.8 million, most of which was spent on ships, the company said on March 5.
'The balance sheet allows us to expand if we find attractive investments,' he added.
Pacific Basin shares gained 5.6 per cent to HK$13.90 at Hong Kong's 12.30pm trading break. The stock has more than doubled this year, beating a 28 per cent gain in the city's benchmark Hang Seng Index.
China has become the world's biggest user of steel, rubber, coal and other commodities because its economy has grown at least 10 per cent in each of the past four years. The country accounts for about a quarter of global dry-bulk demand, Mr Nyborg said.
'There hasn't been sufficient investment in dry-bulk terminals' in China, he added. 'The development of infrastructure and industries in China gives us confidence about strong growth in the years ahead.'
China Merchants Holdings (International) Co, the owner of stakes in the country's five largest container ports, also plans to invest in more dry-bulk terminals in China, chairman Fu Yuning said in July.
China Cosco Holdings Co, Asia's biggest container-shipping line, agreed earlier this month to buy the world's largest fleet of dry-bulk ships from its parent China Ocean Shipping (Group) Co. The shipping line will purchase 412 vessels for 34.6 billion yuan (S$6.9 billion).
Chinese demand has helped cause the Baltic Dry Index, a measure of chartering rates for different sized vessels, to almost double over the past year. It gained 0.2 per cent yesterday to 8,313.
China's coal imports surged 52 per cent to 35 million tonnes in the January-to-August period. Steel consumption may rise 12 per cent to 446 million metric tonnes this year and to as much as 520 million tonnes by 2010, the China Iron and Steel Association said last month.
Global dry-bulk trade will likely rise 5 per cent a year from 2007 to 2010, mainly driven by demand from China and India, Credit Suisse Group said in August.
Increasing orders for new vessels and the conversion of oil tankers into bulk carriers may bring down dry-bulk rates. Pacific Basin, Mitsui OSK Lines and other lines are signing more long-term contracts to lock in rates. Pacific Basin has signed deals in excess of 10 years, Mr Nyborg said.
'There is a concern that supply will increase starting in the second half of 2008,' said Geoffrey Cheng, a Daiwa Institute of Research (HK) analyst. 'That will put pressure on rates.' The company has contracted out 83 per cent of its handysize capacity and 95 per cent of handymax capacity for 2007 at fixed rates as of June 30. For 2008, it had rented out 28 per cent of its handysize capacity and 31 per cent of its handymax fleet.
The company operates 73 handysize and handymax ships and has 15 more on order.
Handysize ships have a deadweight of between 10,000 tonnes and 30,000 tonnes. Handymax vessels have a deadweight of between 30,000 tonnes and 50,000 tonnes.
Growing: 'There hasn't been sufficient investment in dry-bulk terminals' in China, said Pacific Basin's Mr Nyborg, adding that the development of infrastructure and industries in China pointed to strong growth ahead
'We have ambitions to grow our port business,' deputy chief executive officer Klaus Nyborg said in a Sept 14 interview in Hong Kong. The company could invest up to US$1 billion on expansion plans, including ships and terminals, although it has not made a final decision, he said.
China's construction boom has helped double rates for shipments of raw materials, quadrupling first-half profit at Pacific Basin. Buying into terminals may help the shipping line weather any fall in rates caused by a drop in demand or expansion of the global fleet.
'Operating ports is a more stable business than shipping,' said Paul Chan, who helps to manage about US$1.8 billion at Invesco Asia in Hong Kong. 'The question is whether the company can get hold of strategic ports.' In July, Pacific Basin agreed to take a 45 per cent stake in a terminal in Nanjing, eastern China. The venture's approved total investment is about US$74 million, Pacific Basin said. The company also has a venture in the United Arab Emirates.
The shipping line could raise US$1 billion for investments from cash on hand, loans against its fleet and other sources, said Mr Nyborg, 43. Capital expenditure in 2006 totalled US$286.8 million, most of which was spent on ships, the company said on March 5.
'The balance sheet allows us to expand if we find attractive investments,' he added.
Pacific Basin shares gained 5.6 per cent to HK$13.90 at Hong Kong's 12.30pm trading break. The stock has more than doubled this year, beating a 28 per cent gain in the city's benchmark Hang Seng Index.
China has become the world's biggest user of steel, rubber, coal and other commodities because its economy has grown at least 10 per cent in each of the past four years. The country accounts for about a quarter of global dry-bulk demand, Mr Nyborg said.
'There hasn't been sufficient investment in dry-bulk terminals' in China, he added. 'The development of infrastructure and industries in China gives us confidence about strong growth in the years ahead.'
China Merchants Holdings (International) Co, the owner of stakes in the country's five largest container ports, also plans to invest in more dry-bulk terminals in China, chairman Fu Yuning said in July.
China Cosco Holdings Co, Asia's biggest container-shipping line, agreed earlier this month to buy the world's largest fleet of dry-bulk ships from its parent China Ocean Shipping (Group) Co. The shipping line will purchase 412 vessels for 34.6 billion yuan (S$6.9 billion).
Chinese demand has helped cause the Baltic Dry Index, a measure of chartering rates for different sized vessels, to almost double over the past year. It gained 0.2 per cent yesterday to 8,313.
China's coal imports surged 52 per cent to 35 million tonnes in the January-to-August period. Steel consumption may rise 12 per cent to 446 million metric tonnes this year and to as much as 520 million tonnes by 2010, the China Iron and Steel Association said last month.
Global dry-bulk trade will likely rise 5 per cent a year from 2007 to 2010, mainly driven by demand from China and India, Credit Suisse Group said in August.
Increasing orders for new vessels and the conversion of oil tankers into bulk carriers may bring down dry-bulk rates. Pacific Basin, Mitsui OSK Lines and other lines are signing more long-term contracts to lock in rates. Pacific Basin has signed deals in excess of 10 years, Mr Nyborg said.
'There is a concern that supply will increase starting in the second half of 2008,' said Geoffrey Cheng, a Daiwa Institute of Research (HK) analyst. 'That will put pressure on rates.' The company has contracted out 83 per cent of its handysize capacity and 95 per cent of handymax capacity for 2007 at fixed rates as of June 30. For 2008, it had rented out 28 per cent of its handysize capacity and 31 per cent of its handymax fleet.
The company operates 73 handysize and handymax ships and has 15 more on order.
Handysize ships have a deadweight of between 10,000 tonnes and 30,000 tonnes. Handymax vessels have a deadweight of between 30,000 tonnes and 50,000 tonnes.