Bulk shipping market to remain "tight" in 2008, shipbroker says

The global market for dry-bulk cargo shipping will probably remain "tight" next year, supported by congestion at ports and rising demand for commodities in Asia, London-based Simpson, Spence and Young Ltd. said. The level of bottlenecks at Australian ports will be a "key factor" in the balance between supply and demand for dry- bulk freight services, Derek Langston, a market analyst at the shipbrokers, said yesterday at a conference in Sydney. Bulk shippers such as Pacific Basin Shipping Ltd. and South Korea's STX Pan Ocean Co. have more than doubled rates over the past year because of rising imports of iron ore, grain and coal in China and India, the world's two most-populous nations. The Baltic Dry Index, an overall measure of the cost of transporting commodities, has surged 164 percent in the past 12 months.

"While international financial markets have been in turmoil, the dry-bulk commodity market has brushed away all concerns," Langston said at McCloskey Group's Australian Coal conference. "Congestion still remains a key issue for us." The queue of ships waiting outside Australia's Newcastle port to load coal hasn't been less than 37 this year and reached a record 79 in June after storms disrupted operations. The number of ships in the queue is expected to remain at about 40 through December, the Hunter Valley Coal Chain Logistics Team, coordinator of coal movements through the rail and port network at Newcastle, said last week. Over the next few years an expected reduction in congestion at Australian ports and increasing conversions of crude-oil tankers to bulk carriers will "ease pressure" in the freight market, Langston said. That may start as early as 2008, he said. "The heat could be taken out by tanker conversions and decongestion," Langston said. "By the end of the decade we see a shift in the market to the charterer's favor." Orders for new bulk carriers are also increasing supply, with a surge of availability in 2010, Langston said.