Thoresen Thai to Expand Fleet on Decade’s Cheapest Vessels

Thoresen Thai Agencies Pcl (TTA), Thailand’s second-largest shipping company, said it will buy vessels to take advantage of the cheapest prices since 2003 even as commodity rates slump.

Thoresen Thai aims to raise as much as 6.37 billion baht ($214 million) from shareholders next week to fund the expansion, Chief Executive Officer Chandchutha Chandratat said in a phone interview yesterday. The company plans to almost double its dry-bulk shipping fleet to as many as 30 from 16 by 2015, he said.

“We think there are good opportunities this year,” Chandchutha said. “The majority of our planned investment could happen this year” as prices are cheaper, he said.

The average price of a five-year-old 56,000-ton ship was $19.5 million this month, the cheapest since November 2003, according to Clarkson Plc, the world’s biggest shipbroker. The Baltic Dry Index, a key measure of global commodity-shipping rates, slumped to a 25-year low last year, prompting Korea Line Corp. (005880) and Sanko Steamship Co. of Japan to seek court protection.

Demand to ship dry-bulk commodities will exceed fleet growth in the year’s second half as the freight market begins to recover, Pareto Securities AS said in a report earlier this week. Demand will advance 7.7 percent this year as the fleet expands 6.7 percent, according to the Oslo-based investment bank.

Baltic Index

“The purchase of ships at the cheap prices will help cut Thoresen Thai’s operating costs and improve earnings when the shipping rates and demand starts to rebound,” Siam Tiyanont, an analyst at Phillip Securities Pcl in Bangkok, said by phone. “Demand for commodity transportation will reach its bottom later this year and show steady growth in 2014.”

Thoresen Thai jumped 2.3 percent, the most since Jan. 18, to 17.90 baht as of the 12:30 p.m. trading break in Bangkok, extending its gain this year to 7.8 percent. The benchmark SET Index rose 0.6 percent.

China’s 8 percent economic expansion will surpass the government’s target as the country’s share of dry-bulk imports rises to 40 percent from 20 percent in 2003, analysts Jonas Kraft and Erik Haavaldsen at Pareto said in their report.

The Baltic Dry Index averaged 920 last year, the lowest since 1986, according to figures from the Baltic Exchange, the London-based publisher of freight rates. The index fell 1 percent yesterday to 817.

Thoresen Thai seeks to buy new and used vessels that are about five to eight years old, Chandchutha said.

“People who have money are trying to push the price down on the distressed sellers as much as possible,” he said. “But in the last two to three weeks, what I’ve seen is the sellers themselves are pulling deals from the market because they didn’t like the price.”

Shareholders Meeting

Thoresen Thai shareholders will meet Jan. 30 to vote on a revised fund-raising plan after an earlier proposal to raise 9.9 billion baht through a rights offering was rejected in December. Existing stockholders will get two new ones for every five they own at 14 baht each, besides the warrant, Chandchutha said.

The company is also considering adding more rigs to its Singapore-traded offshore service unit, Mermaid Maritime Pcl (MMT), he said. Thoresen Thai plans to order two tender drilling rigs during the current fiscal year to replace ageing ones.

“We are in the early or middle stage of a multi-year cyclical upturn,” Chandchutha said. “Most of the growth will be Asia and the Middle East.” Almost $650 billion is expected to be spent on exploration and production this year, he said.

Thoresen Thai expects to post a net income in the fiscal year ending in September, helped by contributions from its offshore and infrastructure businesses, Chandchutha said, without providing an estimate. The bulk shipping business is expected to post a loss in the quarter ended December as rates fell more than expected, he said.

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net

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