Dry bulk shippers in Taiwan are expected to benefit from the truce in the US-China trade spat as Chinese steelmakers resume orders, President Capital Management Corp (統一投顧) said in a report released on Dec. 22.
Ocean freight prices have been inching up, following a return of demand by Chinese steelmakers for iron ore and coal imports, President Capital said.
As of Dec. 21, the Baltic Dry Index stood at 1,318 points, up 30 percent from a low of 1,003 points on Nov. 20, President Capital said, adding that the gain was primarily driven by a spike in demand for capesize transport — the largest dry cargo ships.
Disrupted supply from BHP Billiton Ltd, the world’s biggest miner, due to a train crash in Western Australia in early November has resumed, easing oversupply pressure that had been mounting since the incident, the report said.
Chinese steelmakers have been encouraged by the respite and a recovery in steel prices, and have resumed inventory orders for iron ore and coal, causing commodity prices to inch higher in Brazil as well as Australia, the report said, adding that other tailwinds for the dry bulk industry include China’s resumption of US soybean imports.
Tighter environmental standards requiring ballast water treatment and fuels with lower sulfur content should quicken the retirement of older vessels and keep transport capacity oversupply at bay, the report said.
Global dry bulk transport capacity is expected to grow by 2.9 percent this year and 3.2 percent next year, significantly lower than the nine-year average, the report said, citing findings by A.P. Moller-Maersk A/S.
Due to the high sticker price of the new generation of vessels, shipping companies have been reluctant to expand their fleets, with many scrambling to liquidate vessels that are at least 15 years old, the report added.
President Capital said it expects Taiwan Navigation Co Ltd (台航) to benefit from China’s resumption of US soybean imports, while Chinese Maritime Transport Ltd (中航) should feel a boost from Chinese ore and coal imports, and Sincere Navigation Corp (新興) should see a 30 percent bump thanks to rising freight rates for oil tankers.
Taiwan Navigation reported earnings per share of NT$1.89 in the January-to-September period of last year, up from NT$0.5 a year earlier.
Chinese Maritime reported that earnings per share jumped from NT$0.21 in the red a year earlier to NT$1.82, while Sincere Navigation tumbled from NT$0.64 to a net loss per share of NT$0.06.
Shares in Taiwan Navigation closed last year with a gain of 14.46 percent, compared with the broader market’s 8.6 percent decline, while Chinese Maritime rose 8.54 percent and Sincere Navigation fell 24.59 percent.
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