Jinhui boss warns of supply imbalance as 2013 profits fall

Jinhui blamed the poor performance on the fall in both freight chartering and hire income as charter contracts were entered into at relatively low freight and two chartered-in vessels were redelivered. The profit fall was also partly due to the recognition of impairment loss on assets held for sale of HKD100.2m upon the reclassification of two owned vessels to “Assets held for sale”, although this was partly offset by an exceptional income of HKD68.1m on elimination of impairment loss previously recognized on the vessel under construction, Jinhui said in a stock market release.

Commenting on the results, chairman Ng Siu Fai said: "2013 has been an interesting year. The global economy showed some promising signs of improvement overall.However, while the demand picture is getting better, we also see contradictory signs on the macro side."

He further noted that while the Fed has signalled the end of quantitative easing, it has also further indicated that a low interest rate environment will continue. "This continuous contradictory environment has encouraged some investors to pour funds into higher risks assets, venturing into unfamiliar playing fields searching for one-off superior returns via appreciation in asset prices rather than steady long term reasonable returns," he said.

Ng said that this has, in recent months, led to another round of newbuilding orders and asset purchases In the dry bulk shipping market. "We see a number of participants new to the industry placing newbuilding orders with a primary (if not only) objective of speculative gain in asset price appreciation, rather than working these supposedly revenue generating assets for long term positive cashflow."

He reiterated that "restoration of balance in shipping capacity versus demand in dry seaborne trade can only happen when non-competitive and non-profitable industry participants with lesser industry expertise, commitment and financial strength are forced to exit the market in time".

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