Hong Kong: Asian dry-bulk shipping stocks were cut to "underweight" at Credit Suisse Group AG, which forecast industry-wide losses through 2010 on cooling demand, rising capacity and unprofitable rates, Bloomberg reported. Shipping lines will likely be unable to raise rates above breakeven levels in the next two or three years, analysts led by Hung Bin Toh wrote in a note to clients today. The Baltic Dry Index, a measure of commodity-shipping costs, will likely range between 1,300 and 2,000 in the period, they added.
The Baltic Dry Index has tumbled 81 percent from a record in May as the global recession saps demand for shipments of iron ore, grain and other commodities. At the same time, shipyards are delivering a glut of new vessels ordered during a boom that ended last year.
To restore balance in the global fleet, 70 percent of new orders need to be cancelled and all vessels over 25 years old have to be scrapped, Credit Suisse said. Dry-bulk demand is likely to drop 3.4 percent this year before rising 4.2 percent next year, the bank added.
Asian bulk lines will likely post an average return on equity of -6.5 percent this year, with "absolute losses" narrowing "moderately" in 2010, Credit Suisse said. The bank previously had a "market weight" rating on the industry.
China Cosco Holdings Co., the world's largest operator of dry-bulk ships, and STX Pan Ocean Co., South Korea's largest, will both likely make losses in 2009 and 2010, the analysts said. Pacific Basin Shipping Ltd., Hong Kong's biggest, will likely make a profit this year followed by a loss next year, they added.
The bank reiterated "underperform" ratings on China Cosco and STX Pan Ocean and a "neutral" grade on Pacific Basin. China Shipping Development Co. was cut to "underperform" from "neutral." [12/05/09]
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