Rising tide for ship industry as freight prices float upward

Freight prices of Panama-size bulk carriers are on the rise, thus brightening the outlook for the industry's profitability this year, local shipping companies said yesterday.

The Baltic Panama Index, a measurement of global freight prices of Panama-sized carriers and routes, has climbed 190 points -- or 15.68 percent -- from 1,211 Dec. 23, the last trading day of 1999, to 1,401 points Jan. 10.

Panama-size bulk carriers, the most common bulk ship size worldwide, are considered medium-size in the industry and can carry between 50,000 and 70,000 tons of cargo.

An official at U-Ming Marine Transport Corp (裕民航運), a major bulk carrier in Taiwan, said the rise was a result of market rumors that Japan plans to import nearly three million tons of chemical materials in March, followed by a large quantity of crops from the US in the following months. U-Ming carries dry bulk cargo, primarily cement, coal, iron ore and grains.

A senior executive at First Steamship Co Ltd (益航股份有限公司), a local bulk carrier that owns just Panama-size carriers, said the rise is also due in part to the market's general optimism about the industry's outlook.

"This year will be a better year for bulk carriers, as the global economy continues to stage a healthy recovery that will increase trade activities between countries and stimulate shipping demands," the executive said.

A peaceful Y2K changeover has encouraged traders to ship goods that had been delayed because of Y2K worries and the Christmas holidays.

For example, the charter hire of Panama-size bulk ships plying Trans-Pacific routes increased 27 percent from December 1999 to US$11,075, the First Steamship executive said.

In particular, the market has been talking up a rumor that Australia plans to ship 500,000 tons of wheat to Pakistan.

Because of rising freights, First Steamship is expected to start realizing profits this year, the executive said. Although the company has yet to finalize its 1999 financial report, the company is sure to post losses for the year, he added.

"In the past, we sometimes had to run a ship with a deficit. But now, we can make about US$3,000 from running it," the executive said.