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Analysts tip dry bulk bonanza to continue

Analysts tip dry bulk bonanza to continue

Hong Kong: Two recently released analyst reports say the record high dry bulk market remains set fair, at least for the next one to two years.

The study by Goldman Sachs' Asia Pacific Shipping division describes dry bulk demands as "resilient" and says that "barring a major slowdown or recession, nominal volume based growth should remain healthy." China represents "over 50% of nominal growth and shows limited signs of cracking at least over the next 12-18 months," it says. By contrast, any slowdown in US growth would have negligible effect, it argues, since the US accounts for only around 2% of the global dry bulk market.

Credit Suisse's report on the Asian Dry Bulk Shipping Sector of August 28 says that 'With the BDI (Baltic Exchange Dry Bulk Index - 2007 evolution pictured) at a record high, we expect more fluctuations in the coming months. Near-term negatives include partial easing of port congestion and increased China coal exports." But at the same time it notes mitigating factors such as lower caol export quotas and severe drought in northern China which is likely to lead to a major drop in domestic soy production and a possible surge in soy bean imports.

"On balance, the sector outlook remains favourable for frieght rates to stay high, with potential oversupply only in 2H09," Credit Suisse concludes.  [28/08/07]