Expanding trade will catch up with the glut of merchant vessels in the first half of next year as accelerating growth in developing economies makes up for China’s slowdown, billionaire investor Wilbur Ross said.
Analysts are overstating the “problems” in China’s economy and their potential impact on shipping demand, the founder of WL Ross & Co. said at a Capital Link Inc. conference in New York today. Private-equity firms investing in shipping won’t overbuild the fleet because they mostly refinance existing vessels and orders, he said.
Ross, known for turning around struggling industries from steel to textiles, first invested in shipping in 2011. Now, it’s the single most time-consuming part of his business, he said, with investments spanning vessels hauling frozen gas, refined fuels, chemicals, coal and grains.
“We first invested in shipping about two years ago knowing it was a volatile industry, but it has proven to be even more volatile than we had anticipated,” Ross said. “In most segments, demand continues to grow and is gradually catching up with the supply of newbuilds. We expect this to continue throughout ’14 and 2015 and to be generally in balance by the first half of 2015.”
The shipping industry is recovering from the worst glut in decades after owners ordered too many ships before the 2008 global recession. Rates will increase as rising U.S. energy output from shale drilling adds cargoes from liquefied petroleum gases to refined oil products and chemicals, he said.
Ross’s company has a 42 percent stake in Navigator Holdings (NVGS) Ltd., the largest owner of small LPG carriers that had an initial public offering in November. Through separate ventures, he has also bought 12 Ultramax dry-bulk carriers with options for eight more, eight stainless-steel chemical tankers that can hold 30 different cargoes, two Newcastlemax coal carriers, and 13 other chemical and crude-oil tankers, he said.
Ross withdrew an initial public offering last week for Diamond S Shipping Group Inc., the product tanker company in which his firm is the largest shareholder, because he said the suggested price was too low.
The shipping industry will consolidate as rates recover, helped by private equity, Ross said.
“We’ve seen it happen in lots of other industries for the benefit of the industry’s structure,” he said. “Boom and bust is great for novels, but it’s a little wearing on the human body.”
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