Dry-Bulk Shipping Demand Seen by Pareto Topping Fleet Growth

Jan. 21 (Bloomberg) -- 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, recommending buying D/S Norden A/S and Golden Ocean Group Ltd.

Demand will advance 7.7 percent this year as the fleet expands 6.7 percent, according to the Oslo-based investment bank. Average daily rates for Capesizes carrying 160,000 metric tons of iron ore and coal will rise 50 percent to $12,000, and earnings for smaller Panamaxes will increase 12.5 percent to $9,000, analysts Jonas Kraft and Erik Haavaldsen said in an e-mailed report today.

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, the analysts said. Steel mills are boosting production as the government spends $150 billion on infrastructure, according to the report.

“After years of a difficult dry-bulk market, we are now getting closer to a turning point,” the analysts said in the report. “We expect the dry-bulk market to remain challenging in the short term, yet demand should start exceeding supply” in the second half of 2013.

The Baltic Dry Index, a measure of commodity shipping costs, averaged 920 last year, the lowest since 1986, according to figures from the Baltic Exchange, the London-based publisher of freight rates. The gauge rose 0.1 percent today, the 13th advance in a row, to 838, remaining at the highest level since Dec. 11.

Daily average returns for all four ship types tracked by the index changed no more than 1 percent. Capesizes, the largest iron-ore carriers, gained 0.2 percent to $9,010 and smaller Panamaxes fell 0.5 percent to $5,831. Supramaxes declined 0.3 percent to $7,610 and Handysizes, the smallest vessels in the gauge, rose 1 percent to $7,079.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net