Friday, January 18, 2008

Update on the Baltic Index

Here's an update to the early posting: Regarding the Dry Bulk Shipping Sector

Posted on Bespoke Investment
Baltic Index Down 37% Since Mid November

The chart posted on the website is most worth noting.

And the following article was posted on Star on 15th Jan 2008.
  • Tuesday January 15, 2008

    Shipping rates down sharply

    HONG KONG: Hyundai Heavy Industries Co., the world's largest shipbuilder, led declines among shipyard stocks on concern of fewer orders for vessels this year after bulk rates fell the most since June 1989.

    Hyundai Heavy dropped 6.6%, the biggest decline in almost five months, to close at 382,500 won. Unit Hyundai Mipo

    Dockyard Co. declined 6.5%, the largest loss in two months, to 244,000 won.

    Bulk rates plunged last week on concern economic slowdown in China, the world's biggest buyer of iron ore used to make steel, and the US may reduce trade demand for commodities and consumer goods. Demand from China, Asia's second-largest economy, last year helped lift fees to a record, prompting vessel orders.

    “Investors are worried that with rates falling so much last week, shipping lines may pull back from ordering more vessels from shipyards,”said Lee Jae Won, an analyst at Tong Yang Investment Bank in Seoul.

    “That would mean the momentum for new orders could come to an end this year.”

    Lee has an “overweight” rating for South Korean shipyards.

    The Baltic Dry Index, which measures shipping costs for commodities, fell 4.6 % on Jan 11 to 7,949.

    “The index is often used by investors to track rates for the shipping industry,’’ Lee said.

    “It seems investors have overreacted to the news.”

    Strong demand from operators of vessels that carry iron ore, coal and consumer goods helped yards in South Korea to win record orders for a fifth straight year in 2007, stretching deliveries to as long as 2012.

    Shipping lines including STX Pan Ocean Co. and Pacific Basin Shipping Ltd. spent a record US$179.8bil in new vessels in the first 11 months of last year, 40% more than US$124.4bil

    invested for all of 2006, according to London-based Clarkson Plc, the world's biggest shipbroker.

    Hyundai Heavy’s net income more than doubled to a record 434.7 billion won (US$464mil) in the third quarter, with sales climbing 19% to 3.73 trillion won.