In Dry Bulk Market,International Shipping News 25/02/2015
The global shipping industry is at its lowest point in 30 years, Malaysian Bulk Carriers Bhd chief executive officer Kuok Khoon Kuan said.
Citing overcapacity and slower global demand as one of the main contributors to the poor market, Kuok said: “In January 2010, the Baltic Dry Index (BDI), a reflection of the dry bulk market, was at 2758 points, and as of Feb 20, 2015, the BDI was at 513 points, a 76% drop, which is very significant.”
Kuok says the large drop is the cause of why many of the shipping companies today to be in grave financial straits.
He added that while the oil prices have came down considerably and expectations being that consuming countries will have more money to spend, the effect will not be translated to the market immediately.
“Even the IMF revised its projection for global growth in 2015 to 2016 to 3.5% from 3.7%. The downshift is mainly due to weaker prospects in major economies.”
Malaysian Bulk Carriers’ pretax profit for 2014 suffered a 60% drop to RM18.33 million as compared to RM45.5 million in 2013.
“Dry bulk is a core business of our group, and with the falling BDI in the past few years, our pretax profit has fallen substantially over the 2010 to 2014 period, from RM244 million in 2010 to RM18.3 million in 2014.”
Kuok said the average time charter rates for the firm’s dry bulk fleets fell by 66% over the five year period, from RM26,000 a day in 2010 to about RM8,700 in 2014.
“Although our fleet size has increased, the revenue has dropped purely as a reflection of the very poor shipping market. In the past ships were earning double digit numbers. Due to slower global demand and overcapacity, rates are going to suffer.”
Kuok says that with overcapacity plaguing the shipping market, it is going to impact negatively on shipping income and therefore the outlook for 2015 is very challenging.
“We are not expecting an immediate turnaround, but hopefully the recent troubles of the shipping industry will cause less investment, and as shipyards get less orders, many of them will close and that will help in reducing capacity in the market.
“In fact, there are reports that of the 1,600 shipyards or so, possibly about 13 to 15% will close if things remain as it is.
“In the past, when they were not getting new orders from dry bulk, tankers, container ships, they still had a lifeline with the offshore sector, but with offshore also turning sour, they are not finding many options, which means those who are financially stretched will find it more difficult to move forward.”
