Friday, June 7, 2013

Not Looking For a Ship

Right after finishing The Shipping Man comes this story suggesting a never ending glut of bulk ships.

"To make matters worse - if that is indeed possible - the Chinese government has noticed the sharp increase in order cancellations from the end of 2012, as well as the increasing unemployment at its shipyards. To that end, the government has ordered various state controlled enterprises to expand their order book for ships.

I am told by an industry insider that there are some very comical orders going through - wholly unnecessary upgrades for perfectly normal ships as each state-owned enterprise head tries to outdo his competing party members for the boasting rights of biggest ship orders.

Not to be left far behind, we are told now that the Japanese government's efforts on money printing and supporting asset prices will soon extend to capital investments; specifically, various Japanese trading companies have been asked to "consider" ordering new ships from local shipyards.

Companies in the business of shipping have to focus on these threats when they evaluate what to do with orders and prices for the next few years. Competing on a global scale on the basis of pure pricing and efficiency is one thing; competing with pseudo-state companies kept on life support on government orders is a whole different matter."
There are a lot of public dry bulk shippers hanging by a thread that won't get a bounce back in dayrates if there are even more newbuilds coming.


John said...

Thanks for posting this. Some very interesting observations.

What's your view on the industry?

p.s. Btw, I don't buy the "this time is different" subtext. Government interventions and Keynesian were not invented after GFC. History rhymes with the past.

Anonymous said...

What do you think about shorting dry bulk shippers with high debt loads and going long on those with low (or no) debt?

CP said...

Is there such a thing as a shipping company with low debt??!

But yes there should be plenty of good dry bulk shorts.