Sunday, July 19, 2009

Energy player inks 10 bulkers/ Exporters and steel mills seek long charters

With the fall in dry bulk vessel asset prices, Chinese players have been avid buyers, looking to take a larger share in Chinese-related transport trades. In this case, coal player Lanyue Energy Development signed up for 10 supramax bulk carriers at Xiamen Shipbuilding. This trend is likely to put Western competitor companies at a disadvantage.

Lanyue is one of the top coal transporters in Guangdong province. As aChinese company it benefits from advantageous domestic financing as well as preferential connections for employment contracts. Major London brokerage firms have been saying for sometime now that they feel the Chinese will be moving closer to the Japanese system of covering their transport needs by long-term contracts of affreightment with their own domestic shipping companies.

Notably, Vale's recent deal with NYK comes amid a rush of fixtures by iron-ore exporters and steel mills looking to secure tonnage long term ( Will the Chinese start to follow suit?

NY-listed dry cargo operators will find this tough competition in the future. Many of these companies expanded in large block deals at top of the market prices and leveraged senior bank debt. They have both higher capital and operating costs in comparison to their Chinese competitors.

The issue in the future is the quality of the recovery in shipping for which the dry bulk sector - especially the larger Capesize units - seems to be taking the lead so far.

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