Shipping companies say it is 'too early to talk of recovery'

The Baltic dry index, which tracks the movement of commodities on some international trade routes, has climbed to about 3400 points from less than 1000 points in September last year.

In the second quarter last year, the index stood at about 11,600 points.

Neil Jowell, chairman of Trencor, which leases containers, said on Friday shipping rates had recovered a bit. But, he said, this did not mean that more goods were being shipped, and he indicated that the demand for goods and services globally remained weak.

Jowell said the recovery of the dry index, which also mirrors how much dry-bulk ships charge for ferrying goods, probably reflected a correction after a steep decline, which appeared to have been overdone.

With the exception of China, Jowell said there did not seem to be clear signs of recovery showing in the shipping market, or generally.

Similarly, Grindrod, the JSE-listed shipping giant, said it was too early to say whether recovery was under way.

Grindrod CEO Alan Olivier said what the company had seen over the past few weeks was increased volumes in certain sectors.

In spite of the challenging shipping conditions, Olivier confirmed that Grindrod had not cancelled any fixed contracts. “Our contracts are with very good counterparties,” he said.

Fred Jacobs, director of corporate relations at shipping giant Safmarine, reinforced the general sentiment, saying there were no definite signs of recovery. Jacobs said too many ships were chasing too little cargo, since volumes had fallen sharply on the back of the global recession.

Global trade in goods and services continued to shrink, hitting shipping companies.

The International Monetary Fund (IMF) noted recently that trade volumes declined worldwide 10%-15% on average this year and was expected to continue next year. The IMF said the financial crisis since September last year had provoked an unprecedented contraction of activity and trade.

If there was a decline in imports and exports, Jacobs said, this affected shipping firms' volumes and revenues.

He said the shipping business was reflective of the global recession and pointed out that more than 90% of all cargo was carried by sea. Many ships were being parked, he said.

Jowell said new shipping orders, which were placed two to three years ago at the height of the shipping boom, were now coming to the market. He said this created extra capacity at a time when demand was shrinking.

Some ship companies seemed to be under more stress than others, with each type of ship responding differently to certain drivers.

Olivier said the container ship and car carrier markets were the two types of ships that had probably been hit the hardest.

On the outlook for the shipping industry, Olivier said Chinese demand had been the catalyst for the improved dry-bulk market. Jowell agreed and said refrigerated containers had not gone down much.

Jowell said some container production factories had closed as there was no demand for containers.

Source: Business Day

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